-  -  N  .3 


A  League  of  Nations 


What  Are 
Fighting  For  ? 


DEMOCRACY  vs.  AUTOCRACY 

By 
JOHN  RAYMOND  CUMMINGS 

Author ~of  Natural  Money 
The  Peaceful  Solution 


Published  by 
CHITTENDEN  CO.,  CHICAGO 


Copyright 

1918 
Chittenden  Company 


PREFACE 
*+«&>i  J,/?, 

"A  League  of  Nations,"  as  set  forth  in  the  following 
pages,  is  a  simple  working  plan  whereby  the  peoples  of  the 
world  can  realize  what  is  now  almost  universally  recognized 
as  the  only  real  guaranty  of  permanent  peace  between  na- 
tions. This,  of  course,  is  in  that  province  of  statecraft  which 
we  may  call  internationalism.  But  if  the  war  settlement 
results  only  in  establishing  permanent  peace  between  nations 
we  may  find  that  there  is  little  improvement,  or  none  at  all, 
in  the  condition  of  the  mass  of  humanity.  To  improve  inter- 
national relations  without  improving  intranational  conditions 
might  prove  a  step  backward  by  giving  oppressive  govern- 
ments a  sense  of  security  against  interference.  Had  a  cohe- 
sive League  of  Nations  been  formed  ten  or  fifteen  years  ago 
it  is  probable  the  Hohenzollern  autocracy  would  have  been 
guaranteed  permanence  for  centuries  to  come.  "What  Are 
We  Fighting  For?"  deals  with  this  intranational  diplomacy, 
which  must  be  complemental  to  "A  League  of  Nations" 
unless  we  are  content  to  look  forward  to  conditions  in  other 
nations  such  as  have  prevailed  in  Russia  the  past  year;  un- 
less the  victory  (now  seemingly  near  at  hand)  is  to  prove 
a  sore  disappointment  to  the  millions  of  heroic  men  and 
women  who  have  made  it  possible.  "Democracy  vs.  Autoc- 
racy" deals  with  the  fundamentals  of  these  opposing  princi- 
ples, and  shows  how  autocracy  works  its  sinister  designs  in 
the  disguise  of  political  democratic  forms. 

Except  "A  League  of  Nations,"  this  booklet  is  an  abbre- 
viated epitome  of  a  comprehensive  system  of  economic  phil- 
osophy now  almost  complete.  The  system  is  partially  set 
forth  in  my  book,  "Natural  Money,  The  Peaceful  Solution" 
(Bankers  Publishing  Co.,  New  York). 

JOHN  RAYMOND  CUMMINGS. 


395830 


A  League  of  Nations 

Perpetual  Peace  and 
Victory  for  All 

UNLESS  this  world  crisis  develops  some- 
thing fundamental,  bad  as  it  is,  it  is  but 
the  prelude  to  a  more  terrible  one  not  far 
distant  in  the  future.    If  it  does  develop  the  right 
fundamental,   terrible  as  it  is,   it  will  be  the 
cheapest  and  best  war  ever  waged — a  war  by 
which  the  world  achieved  righteousness. 

I  believe  it  is  almost  universally  recognized 
that,  whatever  the  immediate  inciting  cause,  the 
underlying  cause  of  the  war  was  economic.  It 
is  notably  a  war  for  world  markets,  for  economic 
freedom  to  the  extent  that  it  is  genuinely  demo- 
cratic, and  for  economic  control  to  the  extent 
that  it  is  autocratic. 

Even  before  the  war  began,  the  necessity  of  a 
League  of  Nations  to  conserve  peace  had  gained 
wide  acceptance  in  the  thought  of  statesmen, 
sociologists  and  the  people  at  large.  Interna- 
tionalism among  Socialists  and  the  attempt  at 
concert  of  action  among  the  wage  workers  of 
many  nations  were  expressions  of  this  movement. 
In  its  violent  forms  of  syndicalism  and  sabotage, 
with  which  we  have  had  to  deal  to  some  extent, 
it  is  ominous  of  an  economic  debacle  that  would 
wreck  civilization  if  such  methods  should  pre- 
vail. Socialists  thought  they  could  prevent  war 


by  refusing  to  participate,  but  nationalism 
proved  stronger  than  internationalism,  so  the 
Socialists  were  in  the  trenches  on  their  respective 
sides  of  the  national  battle  lines  at  the  very  be- 
ginning; yet,  though  nationalism  prevailed  over 
internationalism,  and  though  the  mass  of  the  peo- 
ple are  resolutely  patriotic,  even  now  there  is 
well  grounded  fear  lest  the  aftermath  of  the  war 
should  be  a  drastic  reorganization,  if  not  a  col- 
lapse, of  some  of  our  social  institutions  which 
have  long  been  deemed  the  cornerstones  of  ma- 
terial welfare,  if  not  of  civilization  itself.  Lord 
Northcliffe's  leading  paper,  the  London  Times, 
has  strongly  intimated  the  necessity  of  such  in- 
dustrial changes  as  would  have  been  deemed  rev- 
olutionary before  the  war,  and  similar  expres- 
sions are  heard  on  every  hand.  Not  long  since, 
Earl  Lansdowne  was  thought  to  be  paving  the 
way  for  a  compromise  peace,  with  the  object  of 
avoiding  the  internal  changes  likely  to  follow  in 
thq  wake  of  a  long-protracted  war;  and  there 
are  doubtless  many  beneficiaries  of  unjust  eco- 
nomic conditions  whose  real  attitude  is,  "after 
us  the  deluge,"  whatever  position  public  opinion 
may  force  them  to  assume  for  the  time  being. 

The  League  to  Enforce  Peace  is  doing  a  noble 
work,  but  as  yet  I  have  seen  no  statement  in 
specific  and  definite  details  of  what  the  world- 
embracing  League  of  Nations  shall  be.  It  is 
easy  to  make  the  general  declaration  that  we  are 
fighting  for  democracy  as  against  autocracy. 
This  is  true,  but  the  boys  at  the  front  want  to 
know  something  more,  and  the  boys  behind  the 
boys  at  the  front;  that  is,  the  boys  at  home  who 
are  working  loyally  to  sustain  the  boys  at  the 


front,  and  the  fathers,  and  mothers,  and  sisters, 
and  sweethearts  who  are  giving  their  utmost 
energies  to  support  the  war — want  to  know  some- 
thing more  than  is  conveyed  in  general  state- 
ments. Many  of  them  have  walked  the  streets 
or  tramped  the  highways  in  vain  search  for 
employment  in  this  democracy  of  which  we  are 
justly  so  proud — when  we  compare  it  with  autoc- 
racy. Some  of  those  now  in  the  trenches  did 
this  in  1907,  and  some  were  doubtless  in  the 
breadlines  of  New  York,  Chicago  and  Philadel- 
phia. Are  they  fighting  in  part  to  assure  their 
places  in  future  breadlines  in  a  democracy, 
where  opportunity  is  said  to  be  open  to  all?  Some 
of  them  may  have  read  Bismarck's  words, 
spoken  in  the  Reichstag  in  1884,  "The  man  who 
is  able  and  willing  to  work  has  a  right  to  say 
to  the  Government,  'give  me  work.'  I  stand  for 
that  as  long  as  I  stand  in  this  place."  In  that 
declaration  he  "stole  the  thunder"  of  the  Social- 
ists, and  by  adopting  the  wise  policy  and  craftily 
or  ignorantly  applying  it  in  such  way  as  to  sub- 
serve the  ends  of  autocracy,  he  rapidly  built  up 
the  Leviathan  Frankenstein  that  is  now  seeking 
to  wreck  civilization.  This  policy  alone  ac- 
counts not  only  for  the  vast  amount  of  energy  de- 
voted to  war  preparations  in  Germany,  but  also 
for  the  marvelous  economic  advance,  which  has 
been  the  wonder  of  the  world.  I  shall  deal  in 
the  next  chapter  with  the  democratic  method  of 
applying  the  principle  Bismarck  applied  in  part 
only  and  for  the  support  of  autocracy,  and  shall 
show  a  simple  method  of  accomplishing  for  de- 
mocracy far  more  than  Germany  has  accom- 
plished for  autocracy,  by  recognizing  the  right 


of  men  to  work,  but  even  before  outlining  my 
plan  for  making  A  League  of  Nations  a  reality, 
I  desire  to  emphasize  the  necessity  of  immediate 
action  by  specific  declarations  instead  of  general 
statements. 

A  Diplomatic  Offensive 

As  a  result  of  Russia's  collapse,  we  yielded  the 
military  offensive  to  the  enemy,  and  though  we 
have  regained  that,  we  are  now  in  imminent 
danger  of  permitting  him  to  retain  the  diplo- 
matic offensive  until  the  words  "too  late"  be 
again  written  in  our  record  of  the  war's  conduct. 
We  have  scoffed  at  the  Kaiser's  peace  drives,  but 
we  cannot  reasonably  assume  that  his  own  people 
see  their  hollowness  and  mockery,  nor  that  the 
danger  is  ended.  Dr.  Frank  H.  Bohn  recently 
said : 

"Within  three  months  Germany  will  develop 
a  peace  propaganda  which  will  require  every 
force  of  thought  and  will  which  our  national  in- 
tellect and  character  can  bring  against  it." 

We  should  not  wait  for  more  peace  drives, 
but  should  forestall  all  such  action  by  a  single 
counter-drive  expressed  in  terms  so  plain,  so  def- 
inite and  so  just  that  even  the  German  people, 
deluded  and  spiritually  abused  as  they  have  been 
by  false  teachers,  cannot  fail  to  recognize  them 
as  just.  Such  a  statement  of  what  we  are  fight- 
ing for  will  be  a  double  drive.  It  will  inspire 
our  owin  soldiers  and  people  to  years  of  effort 
and  self-denial,  if  need  be,  and  such  statement 
will  find  its  way  across  No  Man's  Land  and 
sap  the  power  of  autocracy  more  rapidly  than 


the  most  violent  offensive  of  arms.  Let  us  there- 
fore at  once  assure  our  boys  in  the  trenches,  our 
people  at  home,  and  the  peoples  of  all  the  world 
—even  of  the  Central  Powers — that  we  are 
fighting  for  a  regenerated  and  rejuvenated 
world,  from  which  the  snobbery  and  shams  shall 
be  eliminated  and  in  which  Mr.  Schwab's  aris- 
tocracy of  merit  shall  be  permanently  estab- 
lished; assure  our  boys  that  they  are  not  coming 
back  to  be  mere  hewers  of  wood  and  drawers  of 
water  in  the  land  they  have  saved,  but  are  com- 
ing back  to  a  land  where  no  man  shall  ever  pine 
in  enforced  idleness,  and  where  the  people  who 
perform  useful  service  shall  get  all  the  useful 
things  produced,  each  in  proportion  to  his  con- 
tribution of  service.  This,  as  I  shall  set  it  forth, 
should  at  once  go  to  the  boys  at  the  front  and  the 
boys  at  home,  as  the  solemn  pledge  of  a  nation 
in  its  hour  of  danger,  that  they  may  be  inspired 
with  the  vision  of  a  world  from  which  economic 
injustice,  with  its  poverty  and  suffering,  have 
been  eliminated.  The  boys  will  then  have  re- 
ceived satisfactory  answer  to  the  question,  "what 
are  we  fighting  for?"  and  the  Kaiser,  and  Luden- 
dorf,  and  Hindenburg,  and  the  junkers,  will 
have  been  dealt  a  fatal  blow. 

The  Allies'  Peace  Drive 

The  world  is  in  travail.  Internationalism  is 
struggling  to  be  born,  and  humanity  is  looking 
to  America  that  this  greatest  birth  of  time  be 
not  aborted. 

The  failure  of  all  efforts  thus  far  to  establish 
internationalism  on  a  firm  basis  is  due  to  lack  of 


a  world-wide  binding  interest  of  sufficient 
strength  to  prevent  one  or  more  nations  from 
breaking  away.  Lack  of  this  cohesive  element 
would  be  a  fatal  weakness  to  A  League  of  Na- 
tions, and  internationalism  must  be  a  failure  un- 
til the  unbreakable  bond  is  discovered  and  ap- 
plied. And  as  the  bottom  cause  of  the  war  is 
economic,  it  is  obvious  that  the  bond  to  bind  the 
nations  must  be  economic.  Is  there  such  a  bond, 
and  is  the  world  ready  for  its  application  to  the 
nations?  There  is  such  a  bond,  and  the  world 
is  ready.  Not  only  is  the  world  ready — it  is  im- 
patient— and  there  is  no  time  to  lose.  In  one  of 
the  morning  editorials,  under  the  heading, 
"America  the  Hope  of  Russia,"  I  read: 

"A  Russian  expert  has  demanded  in  the  Lon- 
don Times  that  a  group  of  representatives  of  the 
Entente  Allies  gather  at  some  convenient  point 
and  agree  on  what  is  to  be  done  to  prevent  Ger- 
many from  controlling  Russia  after  the  war. 
There  is  no  agreement  now";  and  in  H.  G. 
Wells'  new  book,  "In  the  Fourth  Year:  Antici- 
pations of  a  World  Peace,"  I  read:  "One  can 
trace  week  by  week,  and  almost  day  by  day,  the 
Americanization  of  the  British  conception  of  the 
allied  war  aims." 

Yes,  it  is  to  America  the  world  is  looking,  and 
we  must  not  disappoint  the  world's  expectations. 
It  is  Fate's  delight  to  crush  that  man  or  nation 
that  trembles  at  events  and  fails  to  ride  them  to 
great  purposes.  We  must  not  fail.  Failure 
would  be  a  cosmic  tragedy.  But  neither  must 
we  be  misled  by  the  universal  chorus  of  democ- 
racy into  believing  that  the  "autocrat"  and  "gen- 
eral staff'  of  "The  Unseen  Empire"  have  sud- 

10 


denly  been  converted  to  true  democracy.  They 
have  not.  Our  profiteers  prove  that. 

uTo  prevent  Germany  from  controlling  Rus- 
sia after  the  war" — we  all  see  the  vital  impor- 
tance of  this.  Most  of  us  see  also  that  Germany 
must  be  prevented  from  controlling  Austria- 
Hungary,  Serbia,  Bulgaria,  Roumania  and  Tur- 
key after  the  war,  but  how  many  see  the  whole 
truth?  Let  us  not  deceive  ourselves  nor  be  de- 
ceived. The  larger  truth  is:  We  must  prevent 
any^  nation  from  controlling  any  other  nation. 
In  other  words,  it  is  not  enough  merely  to  pre- 
vent German  domination  of  other  peoples.  We 
must  carry  out  President  Wilson's  declaration 
in  good  faith  and  make  every  nation  free. 

To  accomplish  this  we  must  have  an  interna- 
tional organism  as  definite  and  positive  in  its 
functions  as  our  national  government  organisms 
are.  Its  functions  must  contact  the  daily  life 
and  interests  of  the  people  from  day  to  day,  for 
if  the  world  organism  does  not  do  this,  it  will 
flounder  in  helplessness  and  impotency. 

No  nation  is  honest  enough  to  be  permanently 
bound  against  its  interests  by  an  unwise  agree- 
ment, and  it  is  doubtful  whether  peoples  ought 
to  be  bound  except  by  their  true  interest.  What- 
ever we  may  decide  as  to  this,  it  is  evidently 
desirable  to  bind  nations  together  in  such  way 
that  the  future  interest  of  each  nation  shall  make 
it  impossible  for  it  to  break  away  without  suf- 
fering more  future  loss  than  its  present  gain. 
This  is  the  whole  secret  of  a  binding  League  of 
Nations.  Any  league  that  rests  solely  on  the 

11 


sanctity  of  a  promise  will  not  bind  an  unscrupu- 
lous nation,  and  will  bind  the  scrupulous  one  to 
its  damage. 

The  Unbreakable  Bond 

Almost  as  long  as  I  can  remember,  it  has  been 
a  widespread  belief  that  a  large  part  of  the 
world's  suffering  is  chargeable  to  the  greed  of 
bankers,  and  for  two  or  three  decades  Big  Busi- 
ness has  been  a  co-defendant  in  the  indictment. 
They  have  even  been  charged  by  radical  reform- 
ers, of  whom  I  am  one  apart  (being  a  reformed 
reformer,  but  not  reactionary) ,  with  bringing  on 
war  for  their  'own  profit,  and  Big  Business  has 
often  been  depicted  as  a  juggernaut  that  is  ruth- 
lessly crushing  humanity.  As  a  matter  of  fact, 
Big  Business  will  remodel  the  world  in  a  few 
decades  if  we  provide  the  social  mechanism 
whereby  it  can  work  unhampered  by  legal  re- 
strictions on  the  one  hand  and  by  industrial  un- 
rest on  the  other.  But  to  realize  this  condition, 
the  coming  new  order  must  provide  for  all,  not 
merely  for  Big  Business.  Big  Business  will  be 
bigger  in  just  conditions  than  is  now  even 
dreamed  of,  but  all  men  must  rise  together.  Class 
government  means  war  sooner  or  later,  though  it 
is  seldom  consciously  a  class  war.  The  social 
mechanism  needful  is  what  the  war  will  bring  to 
the  world  if  we  settle  it  right.  But  if  the  men 
"who  do  things"  do  not  improve  the  opportunity 
by  seeing  that  the  war  is  settled  on  fundamental 
principles,  then  it  will  be  settled  as  many  pre- 
vious wars  have  been  settled — by  mere  tem- 
porary shifts. 

12 


President  Wilson  has  set  the  pace  and  indi- 
cated the  direction,  but  as  yet  I  have  seen  no 
reference  in  his  messages  to  any  specific  mechan- 
ism, such  as  I  am  about  to  propose,  the  adoption 
of  which  will  be  the  means  of  realizing  the  lofty 
ideals  he  has  set  before  the  world.  Perhaps  he 
is  reserving  details  for  the  future,  but  if  we  can 
formulate  a  plan  so  obviously  just  and  impartial 
that  no  criticism  can  be  made  of  it,  then  it  seems 
advisable  to  state  it  fully  in  advance  in  order 
that  the  world  may  bear  witness,  and  the  high 
ideals  of  President  Wilson  suffer  no  discount;  in 
order  that  insincere  peace  drives  by  the  Kaiser 
may  no  longer  deceive  even  his  own  subjects; 
in  order  also  that  cunning  reactionaries,  who 
fear  the  triumph  of  true  democracy  more  than 
they  fear  autocracy,  may  not,  when  the  imme- 
diate danger  is  past,  prevent  the  world  from  re- 
alizing the  full  fruit  of  its  heroic  sacrifice.  I 
believe  the  following  is  the  mechanism  required 
to  bring 

Perpetual  Peace  and 
Victory  for  All 

Anyone  who  knows  just  a  little  more  than  a 
little  about  money  and  banking  knows  that  if 
the  government  should  reduce  the  required  legal 
bank  reserve  from  the  present  average  of  less 
than  10%  to  a  still  lower  proportion,  say  5%, 
the  effect  would  be  a  pro  rata  expansion  of  bank 
credit  and  a  further  advance  of  prices,  soon  fol- 
lowed as  a  matter  of  course  by  demands  for  wage 
increase  because  of  the  higher  cost  of  living,  and 
later  by  petitions  from  the  railroads  and  other 

13 


public  service  corporations  for  permission  to  ad- 
vance their  rates  because  of  higher  wages  and 
the  increased  cost  of  materials.  The  converse 
of  this  is  also  true;  that  is,  if  the  government 
should  require  bank  loans  to  be  contracted  from, 
say  ten  times  the  reserve  to  a  smaller  multiple, 
the  effect  would  be  a  general  fall  of  prices,  an 
increase  of  the  purchasing  power  of  the  money 
unit,  a  corresponding  increase  of  the  burden  of 
all  debts  and  fixed  charges,  and  a  final  lowering 
of  money  wages.  It  is  a  vicious  circle,  and  there 
is  no  end  of  our  running  around  it  except  to  fall 
back  and  begin  over.  (The  new  advance  of 
railway  rates  was  made  after  this  was  written.) 

It  is  generally  known  that  the  enormous  inflow 
of  gold  from  abroad  since  the  war  began,  being 
an  addition  to  the  required  gold  reserve  without 
any  corresponding  increase  in  the  reserve  re- 
quirements, became  the  basis  of  several  billions 
of  new  bank  credit,  thus  constituting  a  consider- 
able factor  in  price  advance  over  and  above  the 
advance  due  to  the  relative  scarcity  resulting 
from  the  employment  of  tens  of  millions  of  men 
in  war. 

One  who  knows  and  holds  fast  to  these  almost 
commonplace  truths  will  readily  see  that,  in- 
stead of  issuing  bonds  to  meet  the  expenses  of 
the  war,  the  United  States  could  issue  legal 
tender  bills  (treasury  notes)  receivable  for  all 
public  dues  in  lieu  of  gold  (not  redeemable  in 
gold),  and  that  this  money  would  always  be  at 
par  with  gold  provided  the  bank  reserve  require- 
ments 'were  increased  in  parallel  'with  the  issue 
of  new  money  and  the  new  money  constituted 
the  added  reserve.  This  is  self-evident,  for  if 

14 


the  banks  can  keep  private  credits  at  par  with 
gold,  surely  they  can  keep  as  much  national 
credit  at  par;  that  is,  to  the  extent  of  the  volume 
of  bank  credit  required  by  the  demands  of  busi- 
ness. 

So  let  us  assume  that  the  government  notifies 
the  banks  to  increase  their  reserve  monthly  by 
from  five  to  ten  per  cent  of  the  reserve  existing 
at  the  end  of  each  month,  until  further  notice. 
Of  course  this  will  bring  a  protest  from  the 
banks,  but  if  the  government  furnishes  the  in- 
crease of  reserve  without  charge  by  depositing 
legal  tender  treasury  notes,  and  allows  the  banks 
to  go  on  making  loans  as  before,  but  limited  by 
the  increased  reserve  requirements,  the  banks 
will  be  just  so  much  nearer  solvent  instead  of 
being  technically  bankrupt,  as  they  now  are; 
and  if  this  process  be  continued  the  government 
will  gradually  take  over  the  "unsecured  credit" 
part  of  the  banking  business,  but  will  not  take 
it  over  to  hold  it.  The  government  will  draw 
checks  from  day  to  day  in  payment  for  services 
and  supplies,  and  the  money  will  remain  in  bank 
as  private  deposits,  just  as  nearly  all  bank  cred- 
its now  do.  The  process  will  be  continued  until 
the  legal  bank  reserve  reaches  100%,  and 
bankers  will  thereafter  lend  money  instead  of 
lending  credit,  and  business  men  will  borrow 
money  instead  of  "selling  money  short,"  as  they 
now  do,  with  bankers  as  underwriters  of  their 
promises.  But  bankers  will  not  lend  money 
which  the  owners  may  demand  at  any  moment. 
It  is  not  sound  business  policy  to  lend  money 
that  is  subject  to  call,  and  banking  will  never  be 
perfectly  safe  while  the  practice  continues.  It  is 

15 


simply  legalized  "check  kiting."  Only  time  de- 
posits should  be  loaned,  for  as  lenders  of  money 
belonging  to  others  (deposits),  bankers  are  mere 
underwriters. 

Probably  some  thoughtless  persons  will  de- 
nounce the  proposal  as  high-handed  and  confis- 
catory,  but  a  little  thought  shows  such  conten- 
tion to  be  unfounded.  It  is  not  proposed  to  take 
a  penny  of  the  banks'  assets.  Their  capital,  sur- 

¥'us  and  undivided  profits  will  be  unimpaired, 
hey  will  collect  their  loans  and  pay  their  de- 
positors the  same  as  if  no  change  had  been  made 
in  the  banking  law.  They  will  even  continue  to 
lend  mere  "bank  credit"  the  same  as  they  now 
do  except  that  the  volume  of  such  loans  will  be 
limited  by  the  new  reserve  requirement;  and 
after  the  reserve  reaches  100%,  as  combined  un- 
derwriters and  lenders,  they  will  lend  savings 
deposits.  The  competition  of  the  market  will 
equalize  the  return  to  bankers  with  the  returns 
to  business  in  general.  But  the  contention  that 
such  law  would  be  an  encroachment  upon  in- 
dividual rights  becomes  absurd  when  we  com- 
pare it  with  what  is  now  actually  being  done. 
The  taking  over  of  the  railroads  and  telegraph 
lines  and  the  proposed  assumption  of  govern- 
ment control  of  telephones  and  other  enterprises 
is  far  more  radical  than  my  proposal.  In  these 
cases  actual  property  is  taken  from  private  con- 
trol, but  in  the  case  of  the  banks  it  would  not  in- 
volve any  change  in  the  personnel  of  manage- 
ment nor  even  government  custodianship  of  pri- 
vate property.  It  is  a  change  which  ought  to  be 
made  even  if  no  war  were  in  progress  or  antici- 
pated. If  anyone  doubt  this,  let  him  make  a  sin- 

16 


cere  effort  to  show  any  sound  reason  why  a  pri- 
vate organization-for-profit  should  be  made 
quasi-governmental  in  character  and  granted  the 
special  privilege  of  monetizing  credits  to  the 
extent  of  about  ten  times  its  own  assets  by  giving 
them  the  quasi-governmental  character  of  "bank 
credit,"  which  is  legal  tender  for  all  practical 
purposes. 

There  will  be  no  loss  to  the  banks  by  the 
change  I  propose.  Their  assets  will  not  only  be 
unimpaired,  but  will  soon  be  greatly  enhanced 
in  value.  I  speak  of  requiring  the  banks  to  in- 
crease the  reserve,  but  really  the  depositors 
themselves  will  increase  it,  for  even  if  the  gov- 
ernment should  pay  the  money  direct  to  muni- 
tion makers  and  others  instead  of  depositing  it 
in  the  banks,  it  would  immediately  go  into  the 
banks.  The  banks  will  gradually  readjust  their 
business  to  the  new  conditions,  and  will  get  their 
returns  as  compensation  for  performing  the  true 
functions  of  banking;  that  is,  as  quasi-official  cus- 
todians of  funds,  as  social  accountants,  and  as  ex- 
changers (transferrers)  of  credits  between 
distant  points.  These  are  vitally  important 
functions  of  banking,  and  ought  not  be  confused 
with  the  business  of  lending  and  underwriting, 
as  they  now  are.  The  businesses  are  closely  al- 
lied, and  will  not  be  disjoined  under  the  new 
order,  but  will  be  properly  related.  The  dis- 
tinction is  merely  the  distinction  between  a 
checking  bank  and  a  saving  bank,  and  every 
bank  will  soon  have  a  savings  department,  the 
deposits  of  which  will  be  loaned,  and  probably 
every  customer  enjoying  the  advantage  of  the 
checking  bank  will  be  required  either  to  pay 

17 


higher  charges  for  its  services  or  to  keep  a  speci- 
fied balance  in  the  savings  department.  The 
proposed  change  therefore  amounts  to  this: 

By  requiring  all  deposits  subject  to  check  to 
be  actually  in  bank,  the  government  makes  the 
business  of  banking  absolutely  safe,  and  by  pro- 
viding the  additional  reserve  it  accomplishes 
this  without  hardship  or  inconvenience  to  the 
banks  or  to  business.  By  purchasing  supplies  the 
government  transfers  its  interest  as  depositor  in 
the  banks  to  individual  depositors,  who  get  no 
dividends  on 'their  deposits  in  bank  and  will  of 
necessity  pay  for  all  the  services  rendered,  prob- 
ably in  part,  as  suggested,  by  carrying  their  sur- 
plus as  savings  deposits.  Thus  the  depositors 
will  become  owners  of  the  increase  of  reserve, 
but  will  realize  no  profit  except  in  the  benefits 
of  an  indispensable  service  rendered  at  a  nominal 
cost. 

The  depositors  are  now  owners  of  all  the  as- 
sets of  a  bank  in  excess  of  capital  and  surplus, 
and  as  a  lender  of  credits  belonging  to  its  cus- 
tomers the  bank  is  acting  in  the  double  capacity 
of  a  loan  agent  and  a  guaranty  company.  An 
individual's  "promise  to  pay"  may  be  even  bet- 
ter in  fact  than  that  of  the  average  bank,  yet  it 
will  not  pass  current  in  trade  because  compara- 
tively few  people  know  it  is  good,  whereas  even 
an  obscure  bank's  obligations  will  be  accepted 
because  the  banks,  being  subject  to  official  ex- 
amination, are  impliedly  endorsed  by  the  gov- 
ernment until  closed  by  the  bank  examiner. 

I  say  there  will  be  no  loss  to  the  banks  by  the 
change  I  propose.  They  now  perform  several 
necessary  functions,  the  value  of  which  is  limited 

18 


by  the  volume  of  production  and  exchange.  If 
banking  is  not  a  monopoly  they  cannot  realize 
more  than  the  general  average  return  to  capital, 
all  things  considered  (the  cost  of  labor  involved, 
risk  carried  and  the  high  order  of  ability  re- 
quired) .  If  banking  is  in  any  sense  a  monopoly, 
then  the  monopoly  feature  ought  to  be  elimi- 
nated, but  I  do  not  share  in  the  opinion  that 
bankers,  as  such,*  enjoy  a  profitable  monopoly. 
The  greatest  fortunes  are  not  made  in  banking. 
It  is,  however,  probably  true  that  the  banks  per- 
form much  service  without  charge,  or  below 
actual  cost,  and  recoup  the  loss  by  receiving  un- 
due payment  for  other  service.  This  will  adjust 
itself  and  the  banking  business  as  a  whole  will 
get  just  what  it  now  gets — payment  for  the  serv- 
ice rendered.  But  there  will  be  this  very  great 
gain  to  the  banker:  He  will  not  live  in  con- 
stant fear  of  a  general  collapse  that  may  make 
him  a  criminal  bankrupt  (a  bankrupt  in  fact, 
and  often  imprisoned  as  a  criminal,  though  his 
crime  may  be  only  technical)  ;  and  because  there 


*Xote — "As  such"  is  an  important  qualification,  for  during 
the  last  few  decades  there  has  developed  what  we  may  call 
the  "promotion  banker."  The  late  J.  Pierpont  Morgan  was  the 
most  conspicuous  of  this  type,  and  The  United  States  Steel 
Corporation  was  his  most  notable  achievement.  However,  he 
was  only  one  of  many  in  New  York,  Boston,  Philadelphia  and 
Chicago.  One  of  their  methods  was  to  get  control  of  the 
enormous  funds  of  life  insurance  and  trust  companies  and 
use  them  for  their  enterprises;  that  is,  to  gain  control  of  rail- 
ways and  railway  systems.  As  these  funds  aggregate  several 
billions  of  dollars,  the  power  thus  represented  is  almost  beyond 
comprehension.  It  has  been  common  knowledge  for  some 
years,  that  an  enterprise  requiring  even  a  few  million  dollars 
could  not  be  financed  in  New  York  against  the  will  of  these 
controllers  of  credit,  and  most  readers  will  recall  how  the 
government  itself  was  not  only  intimidated  and  prevented  from 
enforcing  the  law  in  the  case  of  The  Tennessee  Coal  and  Iron 
Co.  by  threats  of  a  panic,  but  was  actually  forced  to  extend 
assistance  to  "Wall  Street."  Many  readers  will  also  recall  the 
fact  that  these  financial  titans  are  sometimes  at  war  among 
themselves,  as  in  the  case  when  the  stock  of  one  of  the  trans- 
continental railroads  went  to  something  like  ten  times  its 
normal  market  value  because  of  the  rivalry  for  control. 

19 


will  be  no  possible  danger  of  collapse,  the  re- 
turns to  the  business  of  banking  will  be  without 
the  frequently  recurring  interruptions  of  panic 
and  ensuing  periods  of  depression.  To  deposi- 
tors there  will  be  the  gain  of  absolute  security, 
which  will  also  benefit  bankers,  for  the  millions 
now  hoarded  will  be  deposited  in  savings  banks. 
So  I  repeat  again,  there  will  be  no  loss  to  bankers, 
but  a  very  substantial  gain,  both  financial  and 

in  the  elimination  of  anxiety. 

***** 

As  bank  credits  are  now  some  forty  billion 
dollars,  the  government  can  meet  the  war  ex- 
penses to  the  extent  of  at  least  thirty  billion  dol- 
lars without  any  expansion  of  the  currency  (bank 
credits),  and  if  the  government's  need  should 
exceed  this  amount  it  can  proceed  in  the  same 
way  after  the  reserve  has  reached  100%,  when 
the  effect  of  further  increase  will  be  a  general 
advance  of  prices  if  the  increase  of  money  vol- 
ume should  outrun  the  increase  in  production, 
but  not  otherwise.  Under  the  100%  reserve  law 
the  money  volume  may  be  increased  to  the  ex- 
tent of  the  increase  in  production  without  caus- 
ing an  increase  in  prices,  and  conversely,  if  the 
money  volume  does  not  keep  pace  with  the  in- 
creasing volume  of  production  the  general  level 
of  prices  must  fall.  Should  the  situation  be  such 
that  money  must  issue  in  excess  of  the  present 
volume  of  bank  credit,  such  excess  will  be  an 
automatic  and  equitable  tax  upon  everybody,  for 
everyone  gets  the  bulk  of  what  he  consumes  by 
exchanging  money  for  it.  The  tax  is  thus  auto- 
matically distributed  without  being  levied,  and 
spread,  and  collected,  with  many  "fingerings." 

20 


Money  issue  is  a  natural  source  of  revenue  for 
the  general  government  to  the  extent  of  the  per- 
manent money  volume,  and  where  the  need  tem- 
porarily exceeds  normal  issue,  as  in  case  of  war, 
excess  issue  is  a  tax  perfectly  distributed  by  the 
automatic  action  of  the  natural  law,  and  shows 
in  the  advance  of  prices — a  tax  no  man  can  evade 
or  shift.  If  we  assume  the  general  money-wage 
level  to  be  fixed  (as  it  will  be  in  the  perfect  social 
order)  the  burden  of  a  general  advance  of  prices 
due  to  unusual  money  issue  will  fall  upon  those 
who  are  living  upon  past  accumulations  of  credit 
(money)  the  same  as  upon  current  producers. 

Lest  it  should  not  be  clear  that  the  foregoing 
is  sound,  let  us  state  it  in  other  form,  thus: 

Assume  that  the  war  is  ended,  that  it  was 
financed  largely  by  the  sale  of  bonds,  and  that 
we  have  a  debt  of  30  billion  dollars  bearing  an 
average  interest  rate  of  4^% — an  annual  charge 
of  one  billion,  three  hundred  and  fifty  million 
dollars.  Let  the  banking  law  be  revised  by  mak- 
ing the  Federal  Reserve  Bank  a  national  insti- 
tution in  the  sense  that  it  shall  be  a  part  of  the 
Treasury  Department.  Require  every  individual 
bank  to  carry  its  reserve  in  the  Reserve  Bank, 
increasing  it  gradually,  as  previously  described, 
until  it  reaches  100%,  and  making  the  bonds  con- 
stitute the  increase  of  reserve,  interest  on  the 
bonds  to  be  suspended  while  so  used. 

This  is  simply  another  way  of  doing  the  same 
thing  as  issuing  treasury  notes  and  requiring 
them  to  be  held  as  the  complement  of  gold  in 
making  up  a  100%  reserve — is  monetizing  the 
bonds  as  bank  credit  after  their  issue  instead  of 

21 


monetizing  bank  credit  and  avoiding  bond 
issue. 

If  anyone  thinks  this  would  be  inflation  in  the 
sense  that  it  would  lower  the  purchasing  power 
of  the  dollar,  let  him  remember  that  present 
bank  credit  is  the  equivalent  of  gold  or  full 
legal  tender  bills,  and  that  in  the  plan  proposed 
there  will  be  no  enlargement  of  the  "currency" 
volume.  Instead,  we  shall  simply  "demonetize" 
present  bank  credit  exactly  equal  to  the  bonds 
monetized.  In  other  words,  it  will  simply  be  a 
substitution  of  the  nation's  credit  for  the  present 
bank  credit  made  quasi-national  by  official  su- 
pervision. I  think  no  one  will  deny  that  present 
bank  credit  is  the  equivalent  of  gold  for  all  prac- 
tical purposes.  Technically  it  is  not  legal  tender, 
but  when  it  ceases  to  be  legal  tender  for  all  prac- 
tical purposes  the  banking  system  is  tottering  to 
its  fall. 

So  there  is  really  no  need  to  prosecute  a  Lib- 
erty Loan  campaign,  and  with  the  passage  of  a 
single  amendment  to  the  banking  law  the  war 
will  be  financed  without  debt,  or  if  we  wait  till 
after  the  war,  the  bonds  will  be  monetized  and 
thus  turned  into  a  perpetual  non-interest  bear- 
ing national  credit. 

But  important  as  this  is  it  is  only  preliminary 
to  and  in  elucidation  <of  the  plan  I  have  in  mind, 
which  is  nothing  less  than  a  speedy  settlement 
of  the  war  and  the  prevention  of  war  in  the 
future — really  a  very  simple  problem. 

If  the  United  States  can  monetize  what  we 
call  bank  credit,  or  its  bonds,  as  set  forth,  ob- 

22 


viously  other  nations  can  do  the  same  in  varying 
amounts;  and  still  more  obviously,  many  nations 
acting  together  can  monetize  their  aggregate 
bank  credits  by  co-operating  in  the  issue  of  an  in- 
ternational, polyglot  legal  tender,  a  World 
Money,  receivable  by  all  the  nations  in  lieu  of 
gold;  not  excluding  gold,  nor  redeemable  in 
gold,  but  the  equivalent  of  gold  for  all  purposes 
in  the  realm  of  each  signatory  power,  just  as 
bank  credit  now  is  virtually  the  equivalent  of 
gold  within  each  nation.  So  let  us  consider  the 
proposal  as  part  of  an  international  enterprise, 
in  brief  as  follows : 

1.  Provide  for  the  establishment  of  a  World 
Congress,  a  World  Bank  and  a  World  Court, 
the  Congress  to  have  absolute  control  of  the  sea 
and  world  highways,  the  bank's  issue  to  be  a 
legal  tender  in  all  the  nations  signatory,  and  the 
court  to  have  original  and  exclusive  jurisdiction 
in  all  disputes  between  nations,  and  its  branches 
in  the  various  nations  to  constitute  the  admiralty 
court. 

2.  Provide  that  each  of  the  nations  signatory 
shall  lodge  its  bonds  with  the  World  Bank  and 
receive  in  exchange  therefor  World  Money  to 
the  extent  of  its  needs  for  money  circulation,  and 
credit  in  the  World  Bank  for  the  remainder.  For 
bonds  privately  held  and  not  surrendered  for 
the  purpose,  let  the  individual  nations  issue  tem- 
porary bonds  to  make  up  its  quota  in  the  World 
Bank  until  the  outstanding  bonds  come  in. 

3.  Provide  that  all  bonds  so  lodged  with  the 
World  Bank  shall  bear  a  uniform  rate  of  in- 
terest payable  in  World  Money  as  follows: 

23 


Two  years  at 

Two  years  at  4     % 

Two  years  at  3^% 

Two  years  at  3     % 

Two  years  at  2l/2% 

Two  years  at  2     % 

and  thereafter  such  rate  of  interest  as  may  be 
determined  by  the  World  Congress.* 

4.     Provide  for  representation  of  the  various 

nations  in  the  World  Congress. 

***** 

Probably  it  would  be  well  to  leave  all  other 
details  to  the  Congress  itself,  but  I  may  here 
point  out  some  of  the  things  this  League  of  Na- 
tions would  make  possible. 

For  the  purpose  of  illustration  let  us  assume 
the  national  debts  to  be  monetized  are  as  fol- 
lows: 

United  States 30  billions 

Great  Britain 40         " 

France   35 

Italy 15 

Germany 30         " 

Russia 20 ' 

Austria-Hungary   20         " 

Small  nations  and  prov- 
inces .  10         " 


Total.  200 


*Note — If  it  be  decided  to  punish  the  Central  Powers 
economically,  no  better  way  is  conceivable  than  to  put  upon 
them  the  burden  of  a  handicap  in  the  World  Bank.  If  it  were 
provided  that  they  should  pay  four  per  cent,  on  their  bonds 
in  the  World  Bank  for  a  century,  while  the  interest  rate  for 
all  others  declined  to  two  per  cent,  in  twelve  years,  and  per- 
haps to  one  per  cent,  or  lower  in  twenty  years,  there  need  be 
no  fear.  It  would  mean  some  six  hundred  to  nine  hundred 
million  dollars  a  year  burden  on  Germany  alone — almost  as 
much  annually  as  she  assessed  upon  France  in  1871. 

24 


At  the  declining  rate  of  interest  suggested  the 
World  Congress  would  have  a  revenue  of  78 
billion  dollars  in  twelve  years,  besides  payment 
for  services  rendered,  which  latter  should  be 
sufficient  for  actual  expenses. 

With  this  enormous  sum  the  World  Congress 
should  buy  all  the  securities  of  the  Panama,  Suez 
and  Kiel  canals  and  make  them  free  to  all  the 
nations  signatory.  Probably  it  would  be  well 
also  to  pay  Turkey  and  England  liberal  sums 
for  the  Dardanelles  and  the  Strait  of  Gibraltar 
and  make  them  free  to  all  nations.  Free  world 
highways  should  also  be  provided  from  Siberia 
to  an  all-the-year  port  on  tide  water.  If  Ger- 
many and  her  allies  join  the  League,  world  high- 
ways should  be  opened  from  the  English  Chan- 
nel to  the  German  frontier,  across  eastern  France 
to  the  Mediterranean,  and  to  the  Adriatic 
through  Austria-Hungary. 

Buy  all  the  navies  of  the  world  and  as  much  of 
the  war  equipment  as  may  seem  advisable. 

Probably  the  foregoing  would  not  consume 
more  than  five  billion  dollars  (certainly  not  more 
than  eight),  leaving  seventy  billions  or  more  for 
the  rehabilitation  of  Belgium,  Serbia,  Poland 
and  northern  France,  and  for  such  world  enter- 
prises as  the  World  Congress  may  deem  advis- 
able. 

Of  course  this  world  Congress  will  be  made 
up  of  representatives  from  all  the  nations  signa- 
tory, and  delegates  from  other  nations,  should 
any  not  enter;  may  have  both  a  house  and  a  sen- 
ate; will  elect  its  own  president,  and  pass  all 
laws  relating  to  the  sea  and  other  world  high- 
ways. The  World  Court  will  be  made  up  of 

25 


judges  from  the  various  nations,  at  least  from 
many  nations,  and  the  World  Bank  will  be  the 
clearing  house  of  the  world,  and  probably  will 
be  the  storehouse  for  all  the  gold  money  of  the 

world. 

***** 

It  is  important  to  explain  that  this  polyglot 
World  Money  will  be  just  what  the  term  signi- 
fies, a  money  printed  in  many  languages.  The 
money  issued  to  a  nation  for  domestic  circula- 
tion will  be  printed  upon  one  side  in  the  lan- 
guage or  languages  spoken  in  that  country,  and 
on  the  other  side  will  be  printed  in  miniature 
in  many  languages.  This  of  itself  will  be  a 
powerful  educational  influence  for  world  unity. 
The  remainder  of  each  nation's  quota  will  be  a 
credit  in  the  World  Bank.  For  convenience, 
there  will  be  in  each  nation  a  national  bank  for 
the  use  of  banks  only,  and  this  will  be  the  con- 
necting link  between  individual  banks  and  the 
World  Bank,  which  latter  will  deal  only  with 
this  one  national  bank  in  each  nation.  It  ought 
to  be  a  part  of  the  Treasury  Department. 

Let  it  be  especially  noted  that  all  the  money 
for  domestic  use  in  a  nation  is  printed  upon  one 
side  in  the  language  of  that  nation.  It  will  be 
received  at  par  for  a  World  Bank  draft,  but 
should  a  nation  break  away  from  the  League  (as- 
suming this  for  the  sake  of  illustration),  its 
drafts  would  be  dishonored.  Thus  virtually  all 
the  money  within  such  seceding  nation  would 
be  made  null  and  void,  and  all  its  credit  in  the 
World  Bank  would  be  suspended.  Whatever 
domestic  system  it  might  then  adopt,  its  interna- 
tional commerce  would  be  hopelessly  handi- 

26 


capped,  even  if  the  League  of  Nations  inter- 
posed no  material  restraints  upon  it. 

This  money  will  be  used  by  all  the  peoples 
of  the  world,  and  will  always  be  above  par  as 
compared  with  gold  bullion  or  the  coinage  of 
any  nation,  and  will  be  used  in  countries  not 
joining  the  league  (should  there  be  any  such), 
because  it  will  pass  everywhere  in  the  world 
without  the  necessity  of  being  exchanged,  and  of 
course  it  will  be  used  in  the  payment  of  all  in- 
ternational balances  and  in  the  payment  of 
duties  so  long  as  tariffs  continue.  To  the  extent 
that  the  people  of  nations  not  joining  the  league 
permanently  hold  the  money  they  would  be  giv- 
ing wealth  to  the  issuing  nations.  It  must  also 
be  remembered  that  in  a  World  Bank,  payment 
of  balances  between  nations  will  have  no  effect 
in  reducing  the  total  of  credits  in  the  bank.  Only 
the  money  in  actual  circulation  need  be  printed. 
This  volume  must  be  sufficient  in  each  nation  for 
the  money  the  people  habitually  carry  in  their 
pockets,  and  to  supply  money  for  payrolls,  but 
this  is  only  a  fraction  of  the  total  volume  of 
money  or  money  equivalent,  nearly  all  of  which 
is  merely  a  book  credit  subject  to  transfer  by  a 
written  order  called  a  check. 

Is  it  conceivable  that  any  nation  would  reject 
peace  upon  such  terms?  And  is  it  conceivable 
that  war  could  come  again,  with  this  world-em- 
bracing co-oppration?  A  nation  cut  off  from 
co-operation  with  other  nations  by  being  dis- 
honored at  the  World  Bank  and  having  its  credit 
suspended,  would  be  in  the  position  of  a 
business  house  without  banking  facilities.  Tlje 
day  on  which  this  is  proposed  to  the  nations  by 

27 


that  modern  miracle,  the  wireless,  will  be  the 
latter  day  of  that  time  which  began  with  the 
birth  in  a  manger  at  Bethlehem,  from  which  our 
world  was  re-dated;  and  will  be  ai  realization 
of  That  Day's  promise:  On  earth  peace,  good 
will  toward  men. 

And  the  next  day's  sun  will  rise  on  a  world 
unvexed  by  war,  with  a  place  in  the  sun  for  all 
the  sons  of  men. 

And  within  a  decade  the  nations  will  learn 
that  there  is  a  potential  money  fund  in  every 
nation  many  times  greater  than  its  quota  of  this 
World  Money;  equal  to  at  least  five  times  its 
annual  wealth  production. 

And  soon  after  the  whole  money  truth  is 
learned,  national  boundaries  will  be  as  little 
noted  as  lines  of  latitude  and  longitude,  for  all 
peoples  will  be  united 

"In  a  parliament  of  man,  a  federation  of  the 
world." 

This  will  be  a  realization  of  President  Wil- 
son's hope  for  "peace  without  victory"  in  the 
sense  of  the  dismemberment,  or  even  the  crush- 
ing defeat,  of  any  nation  (if  the  Central  Powers 
are  not  hopelessly  insane),  but  in  the  broadest 
sense  it  will  be  peace  'with  victory  for  all — vic- 
tory of  the  world  over  War  itself. 

And  the  most  devastating  war  of  all  time  will 
have  been  the  cheapest  war  ever  waged,  for  it 
will  be  virtually  without  debt  and  the  prize 
gained  will  be  the  emancipation  of  humanity. 
There  will  be  no  occasion  for  treaties  and  guar- 
anties; for  alliances  and  counter  alliances;  for 
the  balancing  of  powers  against  powers;  for  dis- 
sembling diplomacy — not  even  for  change  of 

28 


government  forms.  Injustice  cannot  long  per- 
sist in  a  nation  bounded  by  justice,  and  tyranny 
will  be  impotent  with  freedom  just  beyond  the 
horizon.  Even  if  some  far-away  autocrat  should 
fail  to  join  at  the  first,  thinking  to  preserve  his 
autocracy,  he  would  soon  make  a  journey,  like 
the  Queen  of  Sheba,  to  learn  wisdom.  It  will 
be  a  United  States  of  the  World. 

"And  they  shall  beat  their  swords  into  plow- 
shares, and  their  spears  into  pruning-hooks:  na- 
tion shall  not  lift  up  a  sword  against  nation, 
neither  shall  they  learn  war  any  more. 

"But  they  shall  sit  every  man  under  his  vine 
and  under  his  fig  tree ;  and  none  shall  make  them 
afraid,  for  the  mouth  of  the  Lord  of  hosts  hath 
spoken  it." 


But  let  us  assume  what  seems  impossible, 
namely,  that  Germany  prefers  annihilation  to 
freedom  of  the  seas  and  the  world's  guaranty  of 
"a  place  in  the  sun"  and  unlimited  opportunity 
for  development  on  terms  of  equality  with  other 
nations — assume  that  she  prefers  annihilation  to 
such  terms.  Very  well,  we  should  be  in  much 
better  position  to  accomplish  her  annihilation 
than  we  now  are  or  can  possibly  become  without 
such  League  of  Nations. 

As  for  those  who  would  insist  upon  annihilat- 
ing Germany,  or  even  the  leaders,  rather  than 
accept  their  complete  acquiescense,  which  join- 
ing the  League  would  be,  such  persons  are  only 
less  insane  than  the  Kaiser  himself.  Such  atti- 
tude would  discredit  the  claim  of  the  Allies  that 

29 


they  are  fighting  for  democracy  and  would  al- 
most validate  the  claim  of  Germany  that  she 
was  fighting  against  a  concerted  purpose  to  de- 
stroy her.  Against  the  unquestionable  proof  that 
she  actually  started  the  war,  she  would  "confess 
and  avoid";  that  is,  would  admit  that  she  did 
precipitate  it  at  the  particular  time,  because  she 
knew  it  was  inevitable  and  that  her  only  hope 
lay  in  striking  before  her  enemies  were  fully 
prepared  to  accomplish  her  destruction. 


To  further  emphasize  a  plain  truth,  which  is 
obscure  only  because  it  has  been  obscured  by 
ignorance  or  by  intent,  namely,  that  in  permit- 
ting banks  to  lend  "bank  credit"  to  the  extent  of 
eight  or  ten  times  their  holdings  of  lawful  money 
the  government  is  delegating  to  individuals  its 
most  important  and  powerful  monopoly  func- 
tion— to  further  emphasize  this,  let  me  again  ask 
the  reader  to  formulate  an  argument  in  support 
of  the  policy.  As  the  system  is  of  a  piece  with 
the  custom  of  "farming  out  the  taxes,"  he  may 
get  some  help  from  a  study  of  this  ancient  abuse. 
And  should  he  find  an  argument  that  seems  to 
validate  our  "farming  out"  of  the  money-issue 
function,  let  him  make  sure  the  argument  does 
not  prove  too  much.  For  instance,  a  bank  is  a 
quasi-governmental  warehouse  in  which  "social 
credits"  (money)  ought  to  be  safely  stored,  just 
as  wheat,  corn,  etc.,  are  safely  stored  in  govern- 
mentally  regulated  warehouses  called  grain  ele- 

30 


vators.  If  a  banker  may  justly  be  permitted  to  is- 
sue certificates  of  deposit  on  mere  promises  to  de- 
posit (pay)  money  at  a  future  date,  and  this  to 
the  extent  of  eight  or  ten  times  the  actual  money 
deposits  in  bank,  is  there  any  reason  why  the 
owner  of  a  grain  elevator  should  not  be  per- 
mitted to  issue  warehouse  receipts  to  the  extent 
of  eight  or  ten  times  the  grain  in  his  elevator, 
such  receipts  to  be  based  on  promises  to  deliver 
grain  in  the  future? 

And  it  would  be  well  to  inquire  why  virtually 
all  debts,  both  public  and  private,  should  be  con- 
tracted on  the  basis  'of  a  price  level  determined 
by  a  large  volume  of  currency  (bank  credit, 
which  is  money  for  all  practical  purposes),  with 
the  ever-impending  liability  to  payment  when 
the  volume  of  currency  has  been  contracted  by 
twenty,  thirty,  or  even  fifty  per  cent? 

And  in  view  of  the  universally  recognized 
fact  that  a  judge  or  juror  cannot  honorably  act 
in  a  case  in  which  he  is  interested,  and  in  view 
of  the  further  fact  that  the  assets  of  banks  are 
money  and  promises  to  pay  money,  and  that  these 
assets  will  be  increased  in  value  in  substantial 
proportion  to  the  contraction  of  bank  credits,  it 
would  be  well  for  the  defender  of  our  present 
system  to  show  why  the  contraction  of  credits 
should  be  delegated  to  men  who  profit  by  such 
contraction  at  the  expense  of  others,  the  same  as 
if  the  volume  of  currency  (bank  credits)  re- 
mained the  same  and'  all  debts  were  increased 
twenty,  thirty  or  fifty  per  cent  by  a  federal  sta- 

31 


tute  or  by  falsifying  the  bank  balances  of  in- 
dividuals. 


And  lest  it  should  be  thought  an  indictment  of 
our  system  is  an  indictment  of  bankers,  a  charge 
that  they  are  dishonest  as  a  class,  I  specifically 
state  my  belief  that  with  the  exception  of  a  small 
percentage  previously  referred  to,  they  are  men 
of  exceptionally  high  character.  Still  with  the 
same  exception,  they  endeavor  to  protect  the  in- 
terests of  their  clients,  even  at  the  risk  of  their 
own  failure,  often  in  circumstances  requiring 
courage  of  the  highest  order.  The  fault  is  in  the 
system,  which  a  few  unscrupulous  men  may  ma- 
nipulate to  the  peril  of  all ;  a  system  which,  even 
without  manipulation,  is  periodically  fraught 
with  danger  from  influences  originating  in  the 
industrial  order,  as  I  shall  presently  explain. 


32 


What  Are  We 
Fighting  For? 

I  SAID  in  A  League  of  Nations:  "Let  us 
therefore  at  once  assure  our  boys  in  the 
trenches,  our  people  at  home,  and  the  peo- 
ples of  all  the  world — even  of  the  Central  Pow- 
ers— that  we  are  fighting  for  a  regenerated  and 
rejuvenated  world,  from  which  all  snobbery  and 
shams  shall  be  eliminated  and  in  which  Mr. 
Schwab's  aristocracy  of  merit  shall  be  perman- 
ently established;  assure  our  boys  that  they  are 
not  coming  back  to  be  mere  hewers  of  wood  and 
drawers  of  water  in  the  land  they  have  saved,  but 
are  coming  back  to  a  land  where  no  man  shall 
ever  pine  in  enforced  idleness,  and  where  the 
people  who  perform  useful  service  shall  get  all 
the  useful  things  produced,  each  in  proportion 
to  his  contribution  of  service." 

Can  anything  be  more  obviously  just  than  this? 
Can  any  reasonable  person  ask  more,  or  any  fair 
minded  person  grant  less?  Yet  it  means  nothing 
more  than  our  spread-eagle  Fourth-of-July  ora- 
tory unless  it  is  definitely  formulated  as  to  the 
social  mechanism  by  which  it  is  to  be  realized. 
As  I  said  of  our  international  diplomacy,  "To 
accomplish  this  we  must  have  an  international 
organism  as  definite  and  positive  in  its  functions 
as  our  national  government  organisms  are,"  so 
I  say  of  this  tw/r^-national  diplomacy,  that  in 
order  to  make  it  anything  more  than  "sounding 

33 


brass,  or  a  tinkling  cymbal,"  anything  more  than 
a  campaign  catch  phrase,  we  must  make  it  def- 
inite and  specific. 

"The  man  who  is  able  and  willing  to  work  has 
a  right  to  say  to  the  government,  'Give  me  work.' 
I  stand  for  that  as  long  as  I  stand  in  this  place." 
The  Blood-and-Iron  Chancellor  knew  the  so- 
cialistic "thunder"  that  was  worth  sefeling,  and 
he  knew  how  to  pervert  it  to  the  uses  of  autoc- 
racy. This  policy  is  the  secret  of  Germany's 
marvelous  economic  development,  of  her  power 
to  battle  against  half  the  world ;  and  it  is  in  large 
part  the  secret  of  the  morale  of  the  German  sol- 
diers and  people.  As  said,  the  principle  was  per- 
verted in  its  application,  and  made  a  prop  to 
autocracy,  but  it  was  actually  applied,  and  I 
have  read  that  in  several  decades  there  has  at 
no  time  been  more  than  two  per  cent  of  unem- 
ployment in  Germany.  If  this  statement  of  the 
low  percentage  of  unemployment  is  true,  it  is 
likely  that  the  high  percentage  of  enforced  idle- 
ness in  this  and  other  countries  at  various  pe- 
riods was  industriously  advertised  to  the  labor- 
ing classes  in  Germany  and  that  they  are  still  re- 
minded of  the  contrast. 

The  perversion  of  the  principle  was  an  easy 
matter,  for  autocracy  may  safely  recognize  the 
individual's  right  to  demand  employment  if  the 
government  instead  of  the  natural  law  be  left 
to  determine  the  wage.  This  is  the  only  differ- 
ence between  economic  justice  and  all  that  even 
autocracy  could  ask,  for  the  difference  is  the 
whole  surplus  above  a  modest  subsistence.  Thus 
all  the  saving  made  by  keeping  everybody  at 
work  ^vent  to  the  War  Lord  for  implements  of 

34 


war  and  for  trade  drives  all  over  the  world  by 
secret  subsidies  and  other  unfair  methods.  Con- 
sider what  Germany's  economic  position  would 
have  been  if  she  had  been  wise  enough  during 
the  forty  years  preceding  the  war,  to  make  it 
simply  an  economic  drive  for  conquering  the 
world  markets  instead  of  making  her  trade  con- 
quest under  the  handicap  of  enormously  expen- 
sive war  preparations.  If  all  the  labor  devoted 
to  war  preparation  had  been  devoted  to  making 
things  to  use  she  would  have  forced  other  na- 
tions to  recognize  the  truth  Bismarck  stole  from 
the  Socialists  and  devoted  to  the  uses  of  autoc- 
racy. 

Opportunity  is  knocking  at  the  door  of  Ameri- 
ca, and  if  we  rise  to  the  occasion  we  shall  not 
only  witness  "the  Americanization  of  the  British 
conception  of  Allied  war  aims,"  but  shall  witness 
the  Americanization  of  the  world's  conception 
of  war  aims  and  of  peace  aims.  But  we  must 
not  make  the  mistake  of  avoiding  consideration 
of  our  at-home  diplomacy  (our  peace  aims),  or 
of  dealing  in  mere  generalties.  Specific  and 
easily  understood  pledges  are  what  we  must 
have.  To  kill  Autocracy  and  save  Plutocracy 
(if  it  were  possible)  were  more  deplorable  than 
to  lose  the  war.  It  would  be  to  assure  in  the 
near  future  a  world-wide  revolution  to  which 
the  chaos  now  prevailing  in  Russia  would  seem 
mild  by  comparison.  Let  me  not  be  misunder- 
stood, nor  regarded  as  an  alarmist.  There  is  no 
danger  in  this  direction — if  we  settle  the  matter 
right;  but  there  is  no  escape  if  we  settle  it  wrong 
—if  we  kill  Autocracy  and  preserve  Plutocracy. 
And  let  me  not  be  thought  a  radical  who  would 

35 


resort  to  drastic  and  confiscatory  methods  of 
economic  reform.  I  am  radical,  but  I  am  not 
running  amuck  in  the  economic  world.  I  am 
fighting  such  methods,  and  have  already  said: 
"Big  Business  will  remodel  the  world  in  a  few 
decades  after  we  provide  the  social  mechanism 
whereby  it  can  work  unhampered  by  legal  re- 
strictions on  the  one  hand,  and  by  industrial  un- 
rest on  the  other" ;  that  is,  when  we  have  solved 
the  economic  problem,  which  is  really  the  after- 
the-war  problem,  the  pre-war  problem,  the  war 
problem,  the  labor  problem,  the  money  problem, 
the  land  problem.  Henry  Ford  and  Charles  M. 
Schwab,  the  biggest  Big  Business  men  in  the 
world,  are  proving  this  without  waiting  for  fa- 
vorable conditions,  and  I  believe  the  men  of  Big 
Business  in  general  are  rapidly  learning  the 
great  truth  these  two  men  are  so  conspicuously 
exemplifying. 

Our  difficulty  hitherto  has  been  that  Big  Busi- 
ness and  the  industrial  classes  were  both  labor- 
ing under  the  erroneous  belief  that  their  inter- 
ests are  opposed.  This  belief  is  still  widespread, 
even  among  reformers  and  sociologists,  but  it  is 
not  true.  To  establish  economic  justice  it  is  not 
necessary  to  "take  over"  or  to  confiscate  private 
property,  nor  even  quasi-public  property.  I 
have  now  before  me  the  frantic  appeal  of  the 
People's  Anti-Single  Tax  League  of  California, 
where  the  proposal  to  confiscate  land  value  re- 
ceived more  than  250,000  votes  in  1916,  and 
hopes  to  carry  this  year.  This  appeal  is  for 
financial  help,  and  states  that  "there  is  grave 
danger  of  a  Single  Tax  law  being  adopted  at  the 
next  general  election,  unless  our  property  owners 

36 


wake  up  to  a  serious  situation."  Yes,  there  is 
danger,  but  it  will  not  be  averted  by  perpetuat- 
ing the  present  industrial  order.  Such  policy  is 
to  invite  still  more  drastic  methods  when  we 
face  the  after-the-war  problem,  of  which  Lord 
Lansdowne  and  many  others  are  so  apprehensive 
that  they  are  suspected  of  willingness  to  patch  up 
a  peace  in  their  own  interest. 

I  repeat  that  there  is  no  occasion  to  "take  over" 
or  confiscate  private  property.  Not  only  is  it 
unnecessary  as  a  permanent  policy  (whatever 
we  may  find  advisable  in  the  present  exigency), 
but  it  is  dangerous.  I  agree  with  the  London 
Times'  statement  that  "the  boys  are  not  coming 
back  from  the  trenches  to  be  mere  hirelings  on 
the  land,"  but  I  denounce  the  George  proposal 
to  confiscate  land  value,  and  I  declare  unneces- 
sary the  Socialist  proposal  to  "take  over"  the  in- 
struments of  production;  yet,  something  of  this 
sort  or  something  worse  is  what  we  are  coming 
to  if  we  do  not  adopt  the  sound  and  just  economic 
system.  Already  there  are  frequent  hints  that 
the  world  will  be  face  to  face  with  repudiation, 
even  should  the  war  end  soon,  and  this,  too,  I 
denounce,  and  have  shown  how  to  avoid  it.  We 
cannot  establish  justice  by  committing  injustice, 
and  though  we  can  establish  permanent  peace 
among  the  nations,  as  I  have  shown,  permanent 
peace  within  the  nation  can  be  assured  only  by 
economic  justice.  If  this  war  is  to  end  war,  there 
is  no  room  for  the  statesman  (?)  who  thinks  to 
settle  the  after-the-war  problem  by  mere  mitiga- 
tion of  industrial  conditions;  who  is  considering 
the  question,  "how  little  of  the  demand  for  just 
industrial  conditions  can  we  grant  and  still  win; 

37 


how  much  can  we  'keep  back'  of  the  meed  of 
heroism  and  sacrifice  and  still  escape  disaster?" 
Be  he  king,  lord,  commoner,  or  one  of  our  own 
chosen  servants  who  is  faithless  or  fearful,  I  say 
to  him  in  the  words  of  Peter  to  Ananias :  "Thou 
hast  not  lied  unto  men,  but  unto  God."  And  you, 
O  conscious  servant  of  Privilege,  who  think  to 
pay  the  valorous  soldiers  of  Armageddon  with 
deceitful  promises  and  thereby  earn  thirty  pieces 
of  silver,  go  hang  thyself,  that  it  may  be  as  well 
with  thee  as  with  Judas.  It  will  not  do.  We 
must  establish  economic  justice  or  enter  upon 
another  millennium  of  the  Dark  Ages  in  the  near 
future. 

Fortunately  it  is  easier  to  do  exactly  right  than 
merely  to  mitigate  conditions,  and  while  the 
George  system  would  involve  incalculable  hard- 
ships and  chaos,  and  Socialism  (as  hitherto 
taught)  is  not  practicable,  one  or  the  other  of 
these  plans  is  almost  certain  to  be  adopted  in  the 
near  future  if  the  true  reform  is  not  adopted. 

I  say  it  is  easier  to  do  exactly  right  than  merely 
to  mitigate  conditions.  Great  truths  are  simple; 
easily  understood  and  easily  applied.  There  is 
but  one  economic  law  we  need  consider  in  order 
to  establish  economic  justice,  and  that  is  the  law 
of  value,  commonly  called  the  law  of  supply  and 
demand.  This  law  is  to  the  economic  world 
what  the  law  of  gravity  is  to  the  solar  system— 
the  law  that  preserves  its  balance,  and  may  be 
stated  thus. 

When  the  supply  of  a  thing  is  normal  and  the 
demand  for  it  is  normal  its  value  will  be  normal, 
for  normal  value  is  the  resultant  effect  of  normal 
demand  acting  upon  normal  supply. 

38 


There  is  no  exception  to  this  in  all  the  world, 
and  when  anything  sells  in  the  open  market  for 
less  than  it  ought  to  command  in  exchange,  it  is 
because  there  is  more  competition  among  sellers 
to  sell  it  than  among  buyers  to  buy  it;  because 
the  supply  of  it  and  the  demand  for  it  are  not  in 
normal  relation.  This  is  as  true  of  labor  as  it  is 
of  labor  products,  and  wages  (the  value  of  la- 
bor) are  low  solely  and  only  because  laborers  are 
forced  to  compete  for  employment;  because 
there  is  more  competition  among  the  sellers  of 
labor  than  among  the  buyers  of  labor.  The  fol- 
lowers of  Henry  George  think  wages  are  low 
because  rents  are  high.  Not  only  is  this  not  true, 
but  it  is  not  even  true,  as  Socialists  think,  that 
wages  are  low  because  rent  and  interest  together 
take  so  much  of  the  product.  The  exact  con- 
verse of  this  is  true,  namely:  Interest  and  rent 
are  abnormally  high  because  wages  are  low,  and 
wages  are  low  because  laborers  are  forced  to  < 
compete  for  employment. 

They  are  forced  to  compete  for  employment 
because  the  largest  single  field  of  labor  normal 
to  organized  society  is  virtually  closed.  That  is 
the  field  of  public  work,  the  building  of  high- 
ways and  other  public  utilities. 

It  may  seem  like  a  small  matter — whether  high 
rents  cause  low  wages  or  low  wages  cause  high 
rents — but  the  distinction  is  vital  and  far-reach- 
ing; is  as  important  in  political  economy  as  it 
is  in  medical  research  to  determine  whether  the 
bacillus  produces  the  disease  or  the  disease  pro- 
duces the  bacillus.  For  ages  the  science  of  medi- 
cine dealt  mainly  with  effects  (treated  symp-j 
toms),  but  is  now  dealing  with  causes  and  is  as- 

39 


tonishing  the  world  with  its  achievements. 
Economic  science  has  fallen  into  a  similar  error 
and  will  achieve  results  as  marvelous  as  those  of 
medicine,  surgery  and  sanitation  when  it  deals 
with  causes  instead  of  effects.  Plainly,  if  high 
rents  cause  low  wages  we  must,  as  Henry  George 
taught,  deal  with  rent,  but  if  low  wages  is  the 
cause  we  must  deal  with  wages. 

The  simplest  truths  are  last  discovered.  Econ- 
omists and  statesmen  have  always  supposed  that 
taxes  must  be  collected  or  bonds  sold  in  order 
that  public  work  may  be  done,  but  this  is  not 
true.  Public  wealth  may  be  monetized  as  it  ap- 
pears, and  a  very  simple  industrial  system  will 
not  only  establish  normal  wages,  but  will  fur- 
nish a  perfect  system  of  money  and  supply  an 
abundant  revenue  for  the  general  government 
without  taxation,  thus  at  once  solving  the  labor 
problem,  the  money  problem,  the  land  problem, 
the  tax  problem;  in  fact,  all  economic  problems. 
Naturally;  this  declaration  must  seem  amazing 
to  a  tax-ridden  world,  the  more  so  because  taxes 
are  now  at  a  level  hitherto  undreamed  of,  but 
it  is  really  very  simple.  It  is  nothing  more  than 
a  solution  of  the  "surplus  value"  problem  of  the 
economists.  This  so-called  "surplus  value"  has 
been  almost  a  mystery  to  economic  writers  for 
more  than  a  century.  It  attaches  mainly  to  land, 
and  the  belief  is  almost  universal  that  it  neces- 
sarily appears  as  land  value.  Strictly  speaking, 
it  appears  as  privilege  value,  but  the  bulk  of  it 
attaches  to  land.  The  truth  is,  it  appears  as  land 
value  only  because  we  have  not  provided  the 
social  mechanism  to  enable  it  to  appear  as  public 
wealth.  This  mechanism  is  very  simple,  and 

40 


may  be  provided  by  a  federal  statute  of  fewer 
than  100  words,  in  substance  as  follows: 

From  and  after  the  passage  of  this  act  public 
work  in  the  construction  of  highways  and  other 
public  utilities  shall  be  open  in  everyt  rural 
neighborhood  to  all  the  common  labor  that  of- 
fers, all  labor  and  material  to  be  paid  for  in  legal 
tender  service  certificates,  the  unit  of  which  shall 
be  a  day  of  common  labor. 

It  is  well  known  to  all  economists  and  to  busi- 
ness men,  that  when  common-labor  wages  are 
high  all  wages  are  proportionately  high,  for 
every  skilled  laborer  finds  his  own  wage  ratio  to 
the  basic  common-labor  wage.  In  order  to  es- 
tablish normal  wages,  therefore,  it  is  necessary 
only  to  make  the  basic  wage  normal.  The  basic 
wage  will  be  normal  when  there  is  no  competi- 
tion among  common  laborers,  and  skilled  labor- 
ers will  soon  find  their  wage  ratio  to  the  basic 
wage,  making  all  wages  normal.  Let  us  empha- 
size this  point.  The  law  of  supply  and  demand 
is  a  natural  law.  It  is  true  everywhere  and  all 
the  time.  It  is  the  very  basis  and  foundation  of 
all  sound  economic  philosophy  and  of  all  sound 
business  policy.  So  let  us  take  our  stand  on  this 
natural  law  just  as  we  stand  by  the  law  of  grav- 
ity. And  let  us  stand  by  its  corollary  also,  that 
all  wages  will  be  normal  when  the  basic  wage  is 
normal.  It  is  as  invariably  true  that  the  differ- 
ent grades  of  labor  find  their  normal  ratios  to 
the  basic  grade  as  it  is  that  the  value  of  a  higher 
grade  of  steam  coal  is  normally  related  to  the 
lowest  grade  in  use.  If  this  basic  economic  law 
of  supply  and  demand  and  its  corollary  are  not 

41 


true,  then  all  economic  reasoning  is  idle  and  un- 
profitable speculation — merely  academic. 

When  there  is  no  competition  for  employment 
the  wages  of  wage  workers  will  quickly  advance 
to  the  normal  proportion  of  the  entire  product, 
and  after  this  proportion  is  reached,  will  then 
advance  by  as  much  as  the  per  capita  increase 
in  the  productiveness  of  labor.  This  refers  to 
the  real  wage  (what  the  money  wage  will  buy), 
but  as  the  money  wage,  being  a  labor-time  cer- 
tificate, will  never  change,  it  follows  that  the  in- 
crease of  the  real  wage  ('what  the  money \  wage 
will  buy)  will  be  realized  through  increase  in 
the  purchasing  power  of  the  money  unit. 

Now,  when  the  money  unit  absorbs  purchas- 
ing power  by  exactly  as  much  as  the  per  capita 
increase  in  the  productiveness  of  labor  a  very 
curious  and  vitally  important  thing  happens, 
namely:  The  money  itself  becomes  an  invest- 
ment and  will  accumulate  in  enormous  volume. 
It  will  not  earn  dividends,  to  be  paid  periodi- 
cally, but  will  increase  in  exchange  value  just 
as  vacant  land,  on  the  whole,  now  increases  in 
selling  value.  Thus  a  unit  of  such  money  saved 
for  future  use  will  buy  more  product  at  the  later 
date  than  it  represented  when  it  was  earned; 
will  buy  the  greater  product  of  the  same  amount 
of  labor  currently  applied.  It  will  therefore 
give  the  money  saver  (who  is  a  social  lender) 
service  for  service  without  lending  at  interest; 
that  is,  without  the  necessity  of  "buying  a  debt" 
with  it.  Interest,  therefore,  in  the  sense  of  "eco- 
nomic interest,"  will  disappear.  Borrowers  will 
still  pay  lenders  for  the  labor  involved  in  the 

42 


business  of  lending  (wages)  and  for  the  risk  car- 
ried (insurance),  but  "economic  interest"  will 
have  disappeared,  and  when  money  itself  be- 
comes an  investment  its  volume  will  be  all  that 
the  people  need  for  the  purpose  of  saving — as 
soon  as  it  has  had  time  to  accumulate — probably 
in  from  three  to  five  decades. 

When  the  money  unit  absorbs  this  increase  in 
the  productiveness  of  labor  (just  what  vacant 
land  on  the  whole  now  absorbs),  people  will  do 
with  the  money  just  what  they  now  do  with  va- 
cant land,  namely,  use  it  as  a  "storehouse  of 
value,"  a  safe  agency  of  credit  saving  for  age. 
And  when  money  may  be  so  used  they  will  cease 
to  buy  vacant  land  for  the  purpose.  It  is  not 
true,  as  Henry  George  taught,  that  high  land 
value  is  caused  by  speculation.*  It  is  caused 
by  the  necessity  of  using  land  value  to  guarantee 
long-time  credits,  the  great  mass  'of  which  are 
savings  for  age. 

And  when  the  money  unit  absorbs  the  per 
capita  increase  in  the  productiveness  of  labor 
money  wages  will  remain  constant.  An  indi- 
vidual will  increase  his  money  wage  by  increas- 
ing his  skill,  but  the  general  level  of  money 
wages  will  never  change.  Consider  what  this 
means.  It  means  an  end  of  all  contention  as  to 
wages ;  that  strikes  and  lockouts  will  have  been 
ended  forever.  When  this  has  become  clear  to 
the  reader  he  is  in  position  to  appreciate  the  full 
import  of  what  I  said  in  a  League  of  Nations: 

*Note — Land  speculation  does  temporarily  increase  nominal 
values  in  places  where  a  "land  boom"  is  on,  but  land  value  as 
a  whole  cannot  be  maintained  above  the  aggregate  of  indi- 
vidual surplus  credits  to  be  conserved.  This  is  what  land 
value  is. 

43 


"Big  Business  will  remodel  the  world  in  a  few 
decades  if  we  provide  the  social  mechanism 
whereby  it  can  work  unhampered  by  legal  re- 
strictions on  the  one  hand  and  by  industrial  un- 
rest on  the  other."  And  I  think  my  further 
statement,  that  "Big  Business  will  be  bigger  in 
just  conditions  than  is  now  even  dreamed  of," 
will  also  be  granted,  for  with  industrial  harmony 
there  will  be  almost  no  limit  to  economic 
progress. 

I  said  also  in  "A  League  of  Nations" :  "And 
within  a  decade  (after  the  League  is  established, 
as  set  forth)  the  nations  will  learn  that  there  is 
a  potential  money  fund  in  every  nation  many 
times  greater  than  its  quota  of  this  World 
Money,  equal  to  at  least  five  times  its  annual 
wealth  production,"  so  let  us  see  if  we  can  verify 
this  by  making  an  approximate  estimate  of  the 
money  volume  required  for  all  the  people  when 
they  are  able  to  make  their  savings  in  the  form 
ofl  money;  when  they  are  not  obliged  to  keep 
the  money  moving  by  "buying  a  debt"  with  it  in 
order,  as  social  lenders,  to  get  "service  for  serv- 
ice." Payment  for  loans  will  then  fall  to  the 
cost  of  conducting  the  business  of  lending;  that 
is,  as  before  said,  to  the  cost  of  the  labor  in- 
volved (wages)  and  the  risk  carried  (insurance) 
and  the  overhead  charges  (expense),  which  is 
to  say  that  "economic"  interest  will  disappear. 

Of  course  we  cannot  predict  exactly  what  peo- 
ple will  do,  but  for  assumed  conditions  and  as- 
sumed habits  of  saving  for  age,  it  is  a  simple 
actuarial  problem  and  is  mathematically  exact. 

It  is  reasonable  to  assume  that  when  wages 
are  normal  every  normal  man  will  make  ade- 

44 


quate  provision  against  the  necessity  of  laboring 
when  he  is  old,  or  of  becoming  a  burden  upon 
others.  The  billions  of  life  insurance  and  sav- 
ings deposits  attest  the  desire  of  the  people  to 
provide  for  age,  and  that  when  conditions  are 
favorable  this  insurance  against  dependency  or 
the  necessity  to  labor  to  the  end  will  be  many 
times  greater  than  it  now  is,  when  accumulations 
are  restricted  by  low  wages  and  are  often  dissi- 
pated by  reason  of  enforced  idleness. 

It  is  evident  that  the  man  who  labors  forty 
years,  say  from  the  age  of  twenty  to  sixty,  can 
easily  produce  enough  surplus  to  provide  for 
twenty  years  of  freedom  from  necessity  to  labor. 
To  do  so  he  must  consume  only  two-thirds  of  his 
product  during  the  forty  years  of  labor  and  save 
one-third ;  and  if  the  individual  saves  one-third 
of  his  product,  all  the  laborers  together  will 
save  one-third  of  the  total  product.  This  does 
not  mean  that  what  we  call  "consumption  goods" 
will  be  stored.  The  workers'  surpluses  will  be 
consumed  by  those  already  past  the  productive 
period  of  life,  who  will  get  them  in  exchange 
for  "social  credits"  previously  earned  and  saved. 
What  is  surplus  to  those  in  the  productive  period 
is  subsistence  to  the  aged.  Let  us  state  it  thus : 
The  man  in  the  productive  period  wants  "social 
credit"  in  exchange  for  his  surplus,  and  the  man 
past  the  productive  period  wants  that  surplus  in 
exchange  for  his  "social  credit"  previously 
saved.  If  he  cannot  exchange  his  surplus  com- 
modities for  "social  credit"  the  laborer  cannot 
provide  for  old  age,  so  the  producer  is  as  much 
interested  to  find  a  consumer  for  his  surplus  who 
can  give  him  "social  credit"  in  exchange  for  it, 

45 


as  the  owner  of  "social  credit"  is  to  find  a  pro- 
ducer with  surplus  to  sell.  True  money  is  mere- 
ly the  agency  of  automatic  social  accounting. 
Men  will  produce  enduring  forms  of  wealth, 
such  as  houses  and  various  forms  of  capital,  but 
all  their  advance  provision  for  goods  to  be  con- 
sumed from  day  to  day  when  they  are  old,  and 
for  personal  services,  should  be  in  the  form  of 
"social  credit"  (money)  and  will  be  in  this  form 
when  we  have  a  perfect  money  that  absorbs  the 
increase  the  social  lender  is  entitled  to.  Men 
of  exceptional  ability  as  managers  will  make  a 
large  portion  of  their  savings  in  the  various 
forms  of  capital,  but  wage  workers  will  save 
mostly  in  the  form  of  money  because  it  is  per- 
fectly convenient  to  accumulate  from  day  to  day, 
a  little  at  a  time;  because  it  requires  no  manage- 
ment, and  because  it  may  be  spent  from  day  to 
day,  a  little  at  a  time,  whereas  any  form  of  cap- 
ital, land  value,  or  even  a  house,  must  be  bar- 
tered before  its  equivalent  can  be  consumed  in 
the  form  of  consumption  goods  and  personal 
service.  This  necessity  of  resorting  to  barter  is 
certain  to  involve  annoying  delay,  and  very  often 
involves  serious  loss  and  hardship.  It  is  prob- 
able that  more  than  three-quarters  of  the  pro- 
vision for  age  by  wage  workers  will  be  in  the 
form  of  money  under  the  conditions  proposed, 
but  if  we  call  it  one-half  we  shall  certainly  not 
overstate  it. 

As  this  social  credit  (money)  will  be  accumu- 
lated by  individuals  from  year  to  year  during 
forty  years  and  will  be  spent  from  year  to  year 
during  twenty  years,  as  a  whole  it  will  be  held 
thirty  years — one-half  the  total  period  of  grad- 

46 


ual  accumulation  and  gradual  expenditure. 
Counting  both  the  wealth  and  "social  credit"  we 
have  already  seen  that  the  annual  saving  will 
be  one-third  the  annual  production  (by  our  as- 
sumption) and  as  it  will  be  held  thirty  years  the 
volume  accumulation  will  therefore  be  one- 
third  of  thirty  years'  production,  which  is  ten 
times  the  annual  total.  However,  we  have  as- 
sumed that  half  of  this  will  consist  of  houses 
and  other  enduring  forms  of  wealth,  so  the  vol- 
ume of  money  will  be  five  times  the  total  annual 
production.  As  our  annual  production  is  now 
about  40  billion  dollars'  worth,  the  volume  of 
the  money  proposed  will  almost  certainly  be  the 
equivalent  of  200  billion  dollars  in  from  three  to 
five  decades — 5x40  billions. 

But  every  certificate  of  the  money  will  repre- 
sent public  wealth,  whereas  all  the  credit  sav- 
ings for  age;  that  is  to  say,  all  long-time  credits, 
now  tend  to  increase  land  value  because  that  is 
the  only  large  volume  of  "social  value"  avail 
able.  The  reason  of  this  expanding  of  land 
value  is,  that  all  long-time  credits  must  be  guar- 
anteed by  some  form  of  "social  value" ;  that  is, 
by  a  value  that  is  founded  in  the  social  form  and 
is  not  dependent  upon  any  individual's  honesty 
or  continued  success.  Short-time  loans  (com- 
mercial bank  credits)  can  be  secured  upon  goods 
in  the  course  of  manufacture  and  exchange,  and 
are  now  so  secured,  but  the  volume  of  such  loans 
is  limited  to  considerably  less  than  the  annual 
production.  Commercial  bank  loans  are  a  vir- 
tual lien  upon  the  goods  in  the  hands  of  manu- 
facturers and  merchants,  and  a  close  watch  is 
kept  upon  all  such  loans  by  commercial  bankers. 

47 


Not  only  will  commodity  values  not  serve  as  se- 
curity for  savings,  because  of  their  transitory 
character,  but  the  volume  is  little  more  than  suf- 
ficient for  commercial  loans,  and  is  already  so 
used  very  close  to  the  limit  of  safety. 

If  the  savings  for  age  could  not  be  guaranteed 
by  social  value — if  the  volume  of  this  social 
value  were  inadequate — then  individuals  would 
cease  in  large  measure  to  produce  the  surplus 
they  will  produce  and  carry  as  social  credit 
when  there  is  "social  value"  to  guarantee  its  re- 
payment. 

Now,  it  is  evident  that  so  long  as  the  individu- 
al must  carry  his  long-time  credits  in  the  form 
of  loans  to  other  individuals  (debt),  and  so  long 
as  these  must  be  guaranteed  by  "social  value," 
"social  value"  must  be  privately  owned  in  order 
that  it  may  be  used  to  guarantee  individual 
debts.  This  is  necessary  in  order  to  induce 
abundant  surplus  production,  for  if  individuals 
caanot  carry  a  large  part  of  their  surplus  as 
credit  they  will  not  produce  abundant  surpluses. 
Land  value  is  therefore  performing  a  vital  and 
beneficial  function  as  compared  with  the  absence 
of  "social  value,"  but  land  value  hampers  pro- 
duction. It  does  not  hamper  it  as  compared  with 
the  absence  of  "social  value"  in  which  to  carry 
individual  credits,  but  it  does  enormously  ham- 
per it  as  compared  with  having  the  same  volume 
of  "social  value"  in  the  form  of  public  wealth, 
which  is  an  aid  to  every  form  of  production  and 

exchange. 

***** 

One  of  the  most  stupendously  important  fea- 
tures of  this  proposed  industrial  and  monetary 

48 


system  is  that  all  its  operations  are  automatic. 
To  begin  with,  it  automatically  regulates  all  in- 
dustry in  the  following  very  simple  manner: 

Let  us  assume  that  for  some  reason  more  than 
the  normal  proportion  of  labor  had  been  en- 
gaged in  public  work  for  a  considerable  time. 
This  would  mean  that  less  than  the  normal 
amount  had  been  engaged  in  private  production, 
and  as  a  result  there  would  be  a  relative  scarcity 
of  commodities.  This  would  cause  commodity 
prices  to  advance  somewhat,  and  private  em- 
ployers would  offer  slightly  more  than  the  pub- 
lic wage,  thus  drawing  a  part  of  the  labor  from 
public  to  private  employment,  increasing  private 
production,  lowering  commodity  prices  and  so 
restoring  the  balance.  On  the  other  hand,  if 
more  than  the  normal  proportion  of  labor  had 
been  in  private  employment  for  a  considerable 
time  there  would  be,  relatively,  a  superabund- 
ance of  commodities,  and  commodity  prices 
would  be  abnormally  low.  Private  employers 
would  then  release  some  of  their  employes,  who 
would  go  into  public  work  (not  to  soup-houses 
and  bread-lines),  thus  again  restoring  the  bal- 
ance. As  a  matter  of  fact,  however,  there  will 
be  no  noticeable  shifting  from  private  to  public 
work  and  back  again,  except  of  those  whose  pri- 
vate employment  is  seasonal.  The  balance  will 
be  preserved  with  as  little  agitation  as  accom- 
panies the  maintenance  of  the  water  level  in  two 
connected  reservoirs  having  separate  variable 
supplies.  And  in  the  seasonal  character  of  the 
basic  wage  worker's  employment  and  our  fail- 
ure to  deal  with  it.  is  the  source  of  all  economic 
ills. 

49 


I  must  mention  one  more  of  the  many  beauties 
of  the  system's  automatic  operation.  Congress 
will  have  nothing  to  say  as  to  what  the  govern- 
ment's revenue  shall  be,  and  very  little  to  say  as 
to  its  expenditure.  Aside  from  the  "overhead" 
expenses  of  the  Executive,  Administrative  and 
Judicial  departments  (office  expenses) ,  the  work 
will  be  done  and  the  money  will  issue  in  every 
rural  neighborhood  in  exact  proportion  as  men 
were  otherwise  in  enforced  idleness  or  less 
profitably  employed,  for  public  work  will  be 
open  in  every  rural  neighborhood — within  go- 
ing distance  of  every  rural  man's  home.  This  is 
necessary  in  order  that  opportunity  to  labor  may 
be  open  alike  to  all.  When  all  the  otherwise  idle 
labor  is  locally  employed  in  every  rural  neigh- 
borhood, then  public  benefits  will  be  automati- 
cally distributed  by  operation  of  the  natural  law, 
and  the  scandal  of  "log-rolling"  and  "pork- 
barrels"  will  be  at  an  end. 

Naturally  it  will  be  asked :  Why  should  pub- 
lic work  be  open  only  in  the  rural  districts?  I 
have  already  stated  that  it  should  be  open  only 
to  common  labor.  By  this  I  mean  that  public 
employment  at  common  labor  only  may  be  de- 
manded at  all  times.  Much  skilled  labor  will 
be  employed,  but  a  man  may  not  demand  em- 
ployment as  a  skilled  laborer,  though  a  skilled 
laborer  may  demand  employment  at  common 
labor  should  he  be  in  need  of  it.  As  before  said, 
if  we  keep  the  basic,  common-labor  wage  normal 
all  wages  will  be  normal. 

Now,  the  rural  district  is  distinctively  the 
habitat  of  the  typical  common  laborer,  "The 
Man  With  a  Hoe,"  the  farm  laborer;  not  the 

50 


farm  owner,  nor  even  the  tenant  farmer,  both 
of  whom  are  capitalists,  but  the  "hired  man." 

Because  of  the  seasonal  character  of  farming, 
these  basic  wage  workers  are  in  enforced  idle- 
ness during  the  winter  third  of  the  year;  not  all 
of  them,  but  probably  more  than  half  of  them. 
As  a  result,  there  is  constant  competition  for  em- 
ployment and  an  ever-increasing  procession 
moving  from  the  green  fields  to  the  already  over- 
crowded cities,  forcing  wages  down  and  rents 
up.  And  as  a  complemental  effect  of  this  rural 
idleness  during  the  winter  third  of  the  year  and 
the  consequent  drift  to  the  cities,  we  have  the 
annual  embarrassment  of  a  deplorable  shortage 
of  help  on  the  farms  during  the  growing  and 
harvesting  season.  We  have  been  crying  "Back 
to  the  land!  Back  to  the  land!"  for  several  de- 
cades, but  have  not  recognized  the  true  reason 
for  the  abnormal  drift  of  population  to  the  cities. 
The  little  we  have  done  to  cure  the  deplorable 
congestion  of  the  cities  and  assure  adequate  help 
on  the  farms  in  the  growing  and  harvesting  sea- 
son has  been  mere  makeshift.  We  shall  cure  the 
evil  entirely  and  forever  when  we  recognize  and 
deal  wisely  with  the  true  cause,  which  is: 

Farmers  are  short  of  "hands"  in  the  growing 
and  harvesting  season  because  farm  "hands"  are 
short  of  employment  during  the  winter  third  of 
the  year. 

This  is  the  whole  economic  problem  in  a  nut- 
shell. Give  farm  laborers  continuous  employ- 
ment in  the  country  at  normal  wages  and  all 
economic  problems  will  solve  themselves  by  the 
automatic  operation  of  the  system  as  previously 

51 


explained.  Full-time  employment,  even  at  the 
present  wage,  to  a  man  who  is  in  enforced  idle- 
ness one-third  (of  the  year  will  increase  his  an- 
nual wage  50%,  and  absence  of  competition  for 
employment  will  be  almost  or  quite  as  great  a 
factor  for  wage  increase.  We  may  therefore  say 
with  confidence,  that  wages  will  be  almost 
doubled.  Yet  no  one  will  be  injured,  for  no 
debt  or  confiscation  is  involved.  Even  the 
wealthy  need  have  no  fear,  for  the  increase  of 
wages  will  come  largely  by  increase  in  produc- 
tion. Speaking  of  normal  times  before  the  war, 
we  were  wasting  ten  billion  dollars'  worth  of 
energy  annually  by  enforced  idleness,  by  the  do- 
ing of  things  which  will  not  be  necessary  in  just 
conditions,  and  by  the  friction  of  an  industrial 
mechanism  that  is  not  automatic  in  operation. 

Because  the  statement  is  so  startling,  I  must 
explain  my  assertion  that  no  taxes  will  be  neces- 
sary for  the  support  of  the  general  government. 

It  is  evident  that  no  taxes  will  be  necessary  un- 
til the  money  issue  has  reached  a  volume  suffi- 
cient for  all  the  credit  savings  for  age  of  all  the 
people.  We  have  estimated  this  at  the  equiva- 
lent of  200  billion  dollars  for  our  present  popu- 
lation and  present  productive  capacity.  On  the 
same  basis  of  reckoning,  if  our  population  should 
increase  to  400  millions  in  another  century 
(which  would  be  at  a  much  lower  rate  than  for 
the  past  century),  the  proportionate  money 
volume  would  be  800  billion  dollars.  However, 
to  be  conservative,  let  us  divide  this  by  two,  and 
call  it  400  billions  of  dollars  representing  public 
wealth  and  let  us  say  that  both  the  population 
and  the  money  volume  have  then  reached  the 

52 


limit.  Evidently,  then,  further  money  issue 
without  cancellation  would  produce  inflation 
and  a  corresponding  advance  of  prices,  which  is 
the  same  as  the  money's  loss  of  unit  value.  I 
think  there  will  be  universal  agreement  that  can- 
cellation must  then  begin  or  issue  cease.  At 
least  I  will  assume  this — but  even  then  there  will 
be  no  occasion  to  levy  taxes,  for  long  before  this 
stage  of  development  is  reached  there  will  be  an 
inevitable  profit  on  the  public  utilities  owned 
by  the  government.  I  use  the  word  "inevitable" 
advisedly,  for  it  would  be  impossible  to  conduct 
the  utilities  exactly  at  cost,  and  all  the  excess  of 
receipts  above  cost  would  be  cancellation  of 
money.  Even  so  low  a  profit  as  two  per  cent  a 
year  would  mean  a  government  income  of  eight 
billion  dollars  without  taxation,  a  seemingly 
abundant  revenue.  So  taxation  is  destined  to 
become  a  thing  of  the  past,  so  far  as  the  general 
government  is  concerned,  and  the  old  adage,  "as 
sure  as  death  and  taxes,"  will  be  amended.  Two 
per  cent  of  200  billions,  the  estimated  value  of 
public  utilities  for  our  present  population,  would 
be  four  billion  dollars  a  year  for  the  government 
income,  to  which  would  be  added  the  increase  of 
money  volume  due  to  increase  of  population. 
Probably  it  will  be  said  there  must  be  taxation 
for  the  administrative,  executive  and  judicial 
departments  at  least,  but  even  this  is  not  true. 
The  administration  expense  is  merely  the  over- 
head charge  of  the  social  corporation  we  call 
government,  and  all  this  expense  goes  into  the 
value  of  the  social  product  the  same  as  office  ex- 
penses go  into  the  value  of  a  factory's  output. 

53 


In  .the  last  analysis  the  President  is  as  truly  a 
builder  of  highways  as  Mr.  Schwab  is  a  maker 
of  cannon. 

Yet,  though  ground  rents  will  decline  to  nor- 
mal under  the  proposed  system ;  though  they  will 
become  relatively  nominal,  there  will  still  be 
some  ground  rent,  and  I  must  call  the  reader's 
attention  to  two  vitally  important  matters  as  to 
this  fund,  namely:  (1)  It  will  all  be  left  to 
the  local  community  and  so  will  all  be  spent 
under  the  eyes  of  the  people  who  pay  it.  This  is 
of  vast  importance,  though  I  may  not  now  tak? 
time  to  dwell  upon  it.  (2)  All  of  economic 
rent  (all  the  annual  value  of  land  in  excess  of 
the  wages  of  management  and  risks  of  owner- 
ship) may  be  taken  for  public  use  without  de- 
stroying the  selling  value  of  the  land,  when  eco- 
nomic interest  no  longer  prevails.  This  also  will 
be  by  an  automatic  method  called  Voluntary 
Tax.  By  this  system  every  man  will  value  his 
own  holding*  and  pay  the  uniform  rate  of  com- 
munity tax,  but  will  hold  it  on  these  conditions : 
Any  individual  may  purchase  through  the  re- 
corder's office,  at  the  voluntary  valuation  by  pay- 
ing to  the  owner  the  value  he  has  set  and  by  en- 
gaging to  pay  a  higher  annual  tax  to  the  com- 
munity; provided,  however,  that  owners  who 
are  not  users  may  always  retain  ownership  by 
meeting  the  increase  of  tax  offered,  with  a  small 
preference,  say  5%  of  the  increase,  in  their  favor, 
and  users  may  retain  ownership  by  meeting  the 

*Note — Of  course  he  will  not  undervalue  it,  for  if  he  did 
he  would  soon  be  forced  to  sell  at  less  than  its  value.  Neither 
will  he  overvalue  it,  for  he  could  not  sell  at  such  valuation, 
yet  would  be  paying  an  annual  penalty  in  the  form  of  a  tax 
higher  than  he  need  pay.  Owners  will  be  permitted  to  lower 
their  valuation,  with  pro  rata  reduction  of  tax,  but  may  not 
increase  the  valuation. 

54 


increase  of  tax  offered,  with  a  large  preference, 
say  25%  of  the  increase,  in  their  favor.  Homes 
may  be  given  a  still  larger  preference,  or  be  al- 
together exempt  from  forced  sale  while  so 
used  by  the  owner. 

This  system  of  taxation  will  take  unearned 
rent  for  public  use  in  exact  proportion  to  the 
fall  of  the  interest  rate  without  destroying  the 
selling  value  of  land.  This  is  evident,  for  if  we 
assume  a  site  to  yield  $500  a  year  of  what  we  call 
net  income,  and  that  it  is  valued  at  $10,000  be- 
cause the  interest  rate  is  5%,  then,  if  the  interest 
rate  falls  to  4%,  someone  with  $10,000  to  invest 
at  4%  will  bid  $100  of  the  $500  income  into  the 
public  treasury  and  pay  the  owner  his  voluntary 
valuation.  If  interest  later  falls  to  3%  some- 
body with  $10,000  to  invest  at  3%  will  bid  an- 
other $100  of  the  income  into  the  treasury  and 
pay  the  owner  the  $10,000  sale  value.  This  pro- 
cess will  go  on  until  the  interest  rate  falls  to  the 
costs  involved  in  the  business  of  lending,  say  one 
or  two  per  cent,  and  when  money  loans  yield 
only  wages  and  risk  carried,  land  can  yield  only 
wages  of  management  and  the  risk  involved  in 
land  ownership ;  that  is,  risk  of  loss  of  rent  and 
possible  decline  in  selling  value. 

When  it  is  thus  shown  that  economic  interest 
can  be  abolished,  and  is  further  shown  that  the 
disappearance  of  interest  will  enable  us  to  take 
unearned  rent  without  destroying  the  selling 
value  of  land — when  this  is  shown,  then  persis- 
tence in  the  effort  to  take  the  annual  value  of 
land  in  such  manner  as  to  confiscate  the  selling 
value  is  a  wicked  and  indefensible  attempt  to 
perpetrate  a  social  crime  unparalleled  in  his- 

55 


tory.  And  the  system  will  not  only  obviate  the 
grievous  wrong  of  confiscation  involved  in  Sin- 
gle Tax,  but  will  also  abolish  the  assessor  and 
tax  review  board,  and  put  an  end  to  the  errors 
and  favoritism  inseparable  from  any  method  that 
involves  official  discretion  in  the  levying  of 
taxes. 

The  system  is  simply  a  method  of  permitting 
all  long-time  credits  (savings  for  age)  to  appear 
in  the  form  of  public  wealth  instead  of  being 
limited  substantially  to  the  volume  of  land  and 
public  debt;  that  is  to  say,  limited  to  the  volume 
of  privilege  value.  Public  wealth  will  be  the 
sum  of  individual  credit  surpluses. 

An  Objection  Refuted 

Having  shown  that  the  volume  of  the  pro- 
posed money  will  be  the  equivalent  of  200  billion 
dollars  or  more  for  our  present  population  and 
productive  capacity,  if  I  should  fail  to  deal  with 
the  matter  specifically  it  would  almost  certainly 
be  said  that  the  generally  accepted  doctrine 
known  as  "the  quantitative  theory  of  money  re- 
futes all  my  reasoning  and  that  no  other  answer 
to  it  is  necessary.  In  substance  this  theory  is : 

Other  things  being  the  same,  the  unit  value  of 
money  decreases  in  proportion  as  the  money  vol- 
ume increases. 

I  not  only  indorse  this  doctrine,  but  state  it  in 
stronger  terms  and  apply  it  to  all  things  having 
value.  It  is  not  peculiar  to  money.  The  unit 
value  of  any  utility  declines  by  a  more  rapid 
ratio  than  the  volume  increases — other  things  be- 
ing the  same.  Because  of  this,  the  four  million 

56 


extra  bales  of  cotton  harvested  in  1911  as  com- 
pared with  the  crop  of  1910  were  worth  $225,- 
000,000  less  than  nothing;  that  is,  the  larger  crop 
was  worth  $225,000,000  less  than  the  smaller 
crop  of  the  year  before.  The  same  is  true  of 
wheat,  corn,  fruits,  etc.,  and  farmers  are  said  to 
have  considered  the  advisability  of  destroying  a 
part  of  their  crops  in  order  to  realize  more  for 
the  remainder  than  the  whole  crop  could  be  sold 
for.  The  same  is  true  also  of  manufactured 
goods,  but  as  factories  can  be  shut  down  when 
prices  fall  the  effect  is  not  so  pronounced. 

Where,  then,  is  the  error  in  the  assumption 
that  the  quantitative  theory  of  money  refutes  my 
reasoning?  Simply  this:  It  does  not  take  into 
consideration  the  fact  that  the  demand  for 
money  increases  in  parallel  with  the  increase  of 
the  money  supply.  As  the  unit  value  of  any- 
thing is  determined  by  the  ratio  of  the  supply 
of  it  to  the  demand  for  it,  it  is  evident  that  sup- 
ply may  be  increased  to  any  total  without  affect- 
ing the  unit  value  if  the  demand  for  it  is  in- 
creased in  like  proportion. 

When  the  money  unit  absorbs  the  per  capita 
increase  in  the  productiveness  of  labor  and  thus 
gives  surplus  producers  the  increase  they  are  en- 
titled to,  then  money  itself  becomes  an  invest- 
ment, the  most  desirable  form  of  credit  saving 
for  age.  Thus  the  demand  for  money  will  be 
increased  to  five  or  ten  times  the  volume  re- 
quired for  current  exchanges,  even  when  busi- 
ness is  on  a  cash  basis.  Rightly  applied,  there- 
fore, the  quantitative  theory  of  money  confirms 
my  reasoning  and  my  reasoning  confirms  the 
quantitative  theory  of  money. 

57 


Bearing  in  mind  the  fact  that  the  establish- 
ment and  maintenance  of  normal  wages  will 
be  the  solution  of  all  economic  problems  and 
virtually  all  political  problems,  we  may  state 
the  whole  matter  in  brief  as  follows: 

1.  All  economic  injustice  is  comprehended 
in  the  statement  that  wages  are  low. 

2.  Wages    are    low    because    laborers    are 
obliged  to  compete  for  employment. 

3.  They  are  obliged  to  compete  for  employ- 
ment because  the  largest  single  field  of  labor 
normal  to  organized  society  is  virtually  closed, 
namely,  the  field  of  public  labor. 

4.  By  opening  public  work  in  the  rural  dis- 
tricts to  all  the  common  labor  that  offers  we  shall 
end  competition  among  common  laborers  and 
thereby  make  the  common-labor  wage  normal. 

5.  When  the  common-labor  wage  is  normal 
all  wages  will  be  normal,  for  it  is  the  basic  wage, 
to  which  every  skilled  laborer  finds  his  own 
wage  ratio. 

6.  All  wages  will  therefore  be  normal  so 
long  as  there  is  no  competition  among  common 
laborers;  that  is,  so  long  as  public  employment 
in  the  building  of  highways  and  other  public 
utilities  is  open  to  all  the  common  labor  that  of- 
fers. 

7.  When  the  real  wage    (what  the  money 
wage  will  buy)  is  normal  and  the  money  wage 
does  not  change  (being  a  time  unit  of  the  basic 
form  of  labor) ,  the  real  wage  advance  will  come 
by   the    money   unit's    increase    of    purchasing 
power.    The  money  itself,  will  therefore  become 
an    investment    and   will    accumulate    in   even 
greater  volume  than  land  value  now  accumu- 

58 


lates ;  will  supersede  land  value  as  the  form  "sur- 
plus value"  will  take. 

8.  But  as  the  money  will  represent  public 
wealth,  the  proposed  system  is  nothing  more  nor 
less  than  a  simple  and  direct  method  of  express- 
ing so-called  "surplus  value"  as  public  wealth, 
which  aids  production,  instead  of  allowing  it  to 
be  expressed  as  land  value,  which  limits  pro- 
duction. 

9.  If  it  were  possible  to  administer  a  Social- 
istic government  without  favoritism  or  corrup- 
tion, the  highest  human  wisdom  could  not  direct 
the  infinite  forces  with  even  a  reasonable  ap- 
proach to  the  efficiency  of  perfect  personal  free- 
dom and  an  automatic  industrial  mechanism; 
and  if  it  were  possible  to  reach  the  maximum  of 
wealth  production  under  Single  Tax,  and  if  land 
value  could  expand  without  limiting  production, 
and  if  all  land  value  could  be  equitably  assessed, 
fully  collected  and  equitably  distributed  without 
cost — if  all  this  were  possible,  then  by  this  cir- 
cuitous route  "surplus  value"  would  finally  be 
expressed  just  as  it  appears  in  the  first  instance 
by  the  method  proposed.     Is  the  "circumlocu- 
tion" method  the  natural -method? 


Send  this  message  to  the  boys  at  the  front, 
and  to  the  boys  in  the  mills,  the  shipyards,  the 
factories  and  on  the  farm.  They  will  then  know 
without  any  uncertainty  exactly  what  they  are 
fighting  for,  and  all  the  hosts  of  hell  and  Ho- 
henzollern  will  speedily  be  overcome,  if  they 
do  not  at  once  turn  on  their  masters  and  destroy 
them  utterly.  Even  the  Kaiser's  paid  agents  in 

59 


this  country  will  turn  on  him,  syndicalists  and 
I.  W.  W.  malcontents  will  become  staunch  sup- 
porters, and  even  Ireland  will  be  ablaze  with 
loyal  enthusiasm. 


The  Alternative 

It  will  be  well  to  consider  briefly  what  is 
the  alternative  to  the  foregoing.  Are  the  re- 
turning heros,  and  the  dependents  of  the  heroes 
that  do  not  return,  and  the  only  less  heroic  heroes 
and  heroines  who  subordinated  every  other  con- 
sideration to  love  of  country,  and  made  victory 
possible  by  loyal  service  in  the  shipyards,  the 
factories  and  fields — are  they  to  look  forward  to 
such  industrial  conditions  as  followed  the  war 
of  the  states  in  1873?  Are  they  expected  to  be 
content  with  assurances  of  "a  full  dinner  pail" 
when  "times  are  good,"  and  some  form  of  chari- 
table insurance  against  bread-lines  and  soup- 
houses  when  times  are  bad?  Are  they  expected 
to  be  content  even  with  the  assurance  of  a  farm 
from  the  public  domain  not  yet  granted  to  rail- 
road promoters  or  speculatively  held  by  the 
beneficiaries  of  special  privileges,  some  of  whom 
own  and  hold  idle  millions  of  acres  of  the 
choicest  lands  not  yet  brought  into  use? 

Even  supposing  all  multi-millionaires  emu- 
lated the  self-sacrificing  loyalty  evinced  by  many 
of  them  (probably  by  most  of  them),  and  not 
only  relinquished  their  enormous  land  holdings, 
but  turned  their  surplus  millions  of  every  form 
into  a  common  po'ol,  not  only  to  provide  a  farm 
for  every  returning  soldier  who  wanted  one,  but 

60 


to  improve  and  stock  it — even  this  would  not  be 
an  adequate  provision,  for  the  reason  that  the 
total  value  of  farm  products  is  not  increased 
but  decreased  by  redundant  production.  This 
has  so  often  been  the  experience  of  farmers  that 
they  are  said  to  have  considered  the  advisability 
of  destroying  a  part  of  their  crops  in  order  to 
enhance  the  total  value.  Only  a  few  days  ago 
I  was  told  that  in  Michigan  many  apples  had 
been  bought  on  the  trees  and  paid  for,  but  not 
picked,  the  reason  being  that  less  than  the  full 
crop  could  be  sold  for  more  than  all  of  it.  The 
fifteen  million-bale  cotton  crop  of  1911  was 
worth  $225,000,000  less  than  the  eleven  million- 
bale  crop  of  the  year  before,  and  millions  of 
farmers  know  from  bitter  experience,  that  the 
same  is  true  of  corn,  wheat  and  other  products. 
Not  only  can  we  not  reward  our  returning  sol- 
diers by  sending  them  "back  to  the  land,"  but  to 
do  so  would  be  disastrous  to  the  prosperity  of  the 
millions  already  engaged  in  farming.  Abnor- 
mally cheap  food  may  assure  "a  full  dinner 
pail,"  but  it  cannot  assure  much  more.  Unless 
we  have  an  automatic  industrial  system  and  a 
perfect  money  we  cannot  have  normal  wages; 
that  is,  if  the  mass  of  the  people  are  not  able  to 
purchase  their  entire  product  with  their  money 
wages,  we  must  again  face  a  gradually  accumu- 
lating "surplus,"  which  will  vainly  seek  a  mar- 
ket in  foreign  countries.  I  say  "vainly  seek  a 
market,"  for  the  reason  that  each  of  the  great 
nations  will  have  a  similar  "surplus"  to  find  a 
market  for  if  it  does  not  establish  a  home  mar- 
ket capable  of  consuming  as  much  as  its  people 
produce.  This  can  be  done  only  by  establishing 

61 


normal  wages ;  that  is,  by  establishing  economic 
justice.  International  commerce  will  then  be 
mere  exchange  of  products  for  the  sake  of  giv- 
ing all  peoples  greater  variety  than  can  be  pro- 
duced in  any  one  country,  and  no  nation  will 
ever  have  the  least  concern  as  to  a  market  for  all 
the  wealth  its  people  can  produce.  I  have  never 
witnessed  a  more  pitiable  display  of  what  I  may 
call  economic  superstition,  than  that  exhibited  by 
an  intelligent  and  successful  business  man  in 
dealing  with  this  subject.  He  considered  it  in- 
evitable that  a  so-called  "surplus"  of  commodi- 
ties must  gradually  accumulate  and  finally  stop 
the  wheels  of  industry  and  force  thousands  or 
millions  of  men  into  idleness  and  suffering.  "I'm 
afraid  we're  going  too  fast,"  he  said  dolefully 
during  one  of  our  so-called  prosperous  periods. 

Let  us  look  at  the  matter  sanely. 

Always  in  time  of  peace  there  are  millions  of 
men  in  the  United  States  who  are  in  enforced 
idleness  a  considerable  percentage  of  the  time 
each  year,  and  at  intervals  of  a  few  years,  in  the 
frequently  recurring  periods  of  panic  and  de- 
pression, the  chronic  condition  becomes  acute. 
Then  our  organized  charities  and  municipalities 
establish  bread-lines  and  soup-houses  to  mitigate 
the  situation  until,  with  retrenchment  and  de- 
privation on  the  part  -of  the  people,  liquidation 
by  many  business  houses,  and  reckless  extrava- 
gance and  shameful  waste  on  the  part  of  the  few, 
the  embarrassing  "surplus"  is  at  last  consumed. 
Then  the  mills  and  factories  resume  their  activ- 
ity, most  of  the  people  are  employed  a  large  part 
of  the  time,  and  people  are  happy  at  their  work 
— until  the  same  thing  happens  again. 

62 


It  is  notable  that  when  these  periods  of  dis- 
tress come,  the  difficulty  always  begins  in  ex- 
change; never  in  production  proper,  and  there 
actually  is  a  "surplus"  that  cannot  be  sold;  that 
is,  cannot  be  exchanged,  and  which  is  useless  un- 
til it  is  exchanged.  These  "surplus"  products 
cannot  be  exchanged  because  those  who  need 
them  (and  whose  labor  produced  the  larger  part 
of  them)  have  not  the  money  or  money  equiva- 
lent with  which  to  buy  them,  and  those  who 
could  buy  them  do  not  need  them;  cannot  con- 
sume them;  cannot  even  waste  them.  Ail  this 
has  been  long  noted  and  much  commented  up- 
on, but  there  is  another  notable  fact,  comple- 
mental  to  the  foregoing,  which  has  not  been  co- 
ordinated therewith  so  far  as  I  know.  Over 
against  this  frequently  recurring  and  so  distress- 
fully embarrassing  "surplus,"  which  stops  in- 
dustry because  it  cannot  be  sold,  there  is  at  all 
times  a  deplorable  shortage  of  things  that  do  not 
have  to  be  sold.  They  are  forms  of  wealth 
needed  by  everybody  at  all  times  and  in  all 
places,  and  are  of  such  character  that  they  can- 
not possibly  be  produced  in  excess  of  the  need. 

These  forms  of  wealth  are  highways  and  other 
public  utilities. 

In  order  that  we  may  deal  with  the  problem 
that  confronts  us  at  all  times  rather  than  with 
something  unusual,  let  us  assume  the  condition 
of  1893  to  have  recurred  (as  it  will  a  few  years 
after  the  war  ends  if  we  do  not  establish  a  just 
industrial  system),  and  that  a  congressional  com- 
mittee has  taken  the  matter  in  hand  to  see  what 
ought  to  be  done.  Assume  that  the  federal  sta- 
tute for  open  public  employment  and  service 

63 


money  is  under  consideration  and  that  the  com- 
mittee is  hearing  opinions  of  it  pro  and  con. 
Assume  further,  that  one  of  our  wise  statesmen 
or  professors  from  a  seat  of  learning,  has  op- 
posed it  on  the  ground  that  "it  is  not  a  proper 
function  of  government  to  provide  employment 
for  men  in  enforced  idleness."  A  representative 
of  labor  is  next  heard,  and  we  may  imagine  him 
to  speak  as  follows: 

Mr.  Chairman  and  Gentlemen  of  the  Com- 
mittee :  I  do  not  know  whether  the  government 
should  permanently  employ  all  idle  men  or  not, 
but  this  I  do  know,  that  so  long  as  an  industrial 
system  is  maintained  under  which  men  are  often 
in  enforced  idleness  and  obliged  to  beg,  steal  or 
starve,  the  government  should  employ  all  such 
men  until  governments  learn  how  to  govern  so 
that  none  shall  be  in  enforced  idleness.  Men 
whose  wives  and  children  are  hungry  and  cold 
cannot  wait  for  philosophers  to  evolve  the  per- 
fect social  order.  The  objection  of  the  gentle- 
man who  has  just  spoken  is  technical,  scholastic 
mockery,  and  assumes  that  men  were  made  for 
government,  not  government  for  men.  Such  ob- 
jection is  as  specious  and  as  foreign  to  reason  as 
would  be  a  surgeon's  refusal  to  render  first  aid 
to  an  injured  person  on  the  plea  that  his  license 
did  not  cover  the  locality.  It  is  not  only  un- 
worthy of  your  consideration,  but  of  an  answer. 
Still,  to  take  Solomon's  advice  and  answer  a 
technical  objection  technically,  I  suggest  this  to 
the  committee :  Make  the  law  tentative  by  pro- 
viding that  it  shall  be  voted  upon  at  each  presi- 
dential election,  and  shall  not  become  a  per- 
manent law  until  it  shall  have  been  endorsed 

64 


three  times  by  a  majority  of  the  nation's  voters 
after  it  shall  have  been  in  full  operation  for 
three  years.  And  I  suggest  further  (in  defer- 
ence to  those  who  think  God  made  gold  in  order 
that  men  might  coin  it  into  money),  that  gold 
be  not  demonetized  until  the  people  demonitize 
it  by  vote.  If  we  call  a  unit  of  this  service 
money  a  "daylor"  there  will  be  no  confusion. 
Let  gold  still  be  a  legal  tender  for  all  contracts 
expressed  in  gold,  and  for  taxes,  at  its  market 
ratio  to  the  new  money.  There  can  be  no  sound 
objection  to  this,  for  every  man  who  prefers 
gold  can  contract  for  gold,  and  those  who  pre- 
fer "daylors"  will  contract  for  "daylors." 

Gentlemen  of  the  Committee,  consider  this : 
For  more  than  300  years  in  this  country,  and  for 
thousands  of  years  in  the  old  countries,  govern- 
ments have  been  endeavoring  to  discover  some 
practicable  way  to  finance  the  building  of  high- 
ways and  other  public  utilities,  but  no  adequate 
system  has  ever  been  found.  For  years  past  there 
have  been  organizations  of  business  men  in  the 
large  cities,  whose  sole  purpose  is  to  devise  some 
method  to  raise  funds  for  the  building  of  high- 
ways, and  these  organizations  have  worked  side 
by  side  with  those  philanthropic  organizations 
whose  sole  purpose  is  to  find  employment  for 
men  in  enforced  idleness.  Think  of  the  absurd- 
ity, Gentlemen  of  the  Committee:  One  organ- 
ization with  much  work  to  do,  hunting  for  some 
way  to  get  the  work  done;  other  organizations 
seeking  work  for  idle  men,  yet  no  power  to  co- 
operate! Why  this  lack  of  co-ordination? 
Stated  in  brief  it  is  nothing  more  than  this :  The 
same  school  of  economic  philosophers  of  nega- 

65 


tion  who  teach  that  "it  is  not  a  proper  function 
of  government,"  etc.,  have  taught  also  that  taxes 
must  be  levied  or  bonds  sold  in  order  that  public 
work  may  be  done.  This  is  not  true,  for  public 
wealth  may  be  monetized  as  it  appears,  and  tax- 
ation 'or  debt  for  the  support  of  the  general  gov- 
ernment is  not  necessary.  On  behalf  of  the  la- 
boring men  of  America,  if  this  bill  is  passed,  I 
promise  to  build  all  the  highways  and  other  pub- 
lic utilities  needed  and  to  take  in  payment  the 
service  money  provided  for  by  the  bill.  As  it 
will  involve  no  debt  and  no  taxation,  can  any 
valid  objection  be  urged  against  it?  Whatever 
public  works  are  built  under  the  provisions  of 
this  bill  will  be  a  net  gain  to  the  government. 
If  a  certificate  of  the  money  is  not  worth  much 
in  the  market,  there  will  not  be  much  of  the 
money;  if  a  unit  of  the  money  is  worth  much, 
there  will  be  a  large  volume  of  it,  and  in  this 
respect  it  is  exactly  opposite  in  character  to  gold 
and  other  commodity  moneys,  for  their  unit 
value  falls  with  increase  of  volume  for  given 
conditions. 

And  this  is  also  true:  A  unit  of  the  proposed 
money  must  always  equal  a  day  of  common  la- 
bor, for  as  the  public  wage  will  not  change,  the 
unit  of  money  being  a  time  unit  of  common 
labor,  if  the  money  unit's  value  could  fall  below 
a  common-labor  day,  money  would  automatical- 
ly cease  to  issue,  for  when  the  public  wage  does 
not  attract  labor  it  can  only  be  because  private 
employment  is  offering  more  than  the  public 
wage.  To  say  that  this  money  will  lose  unit 
value,  therefore,  is  equivalent  to  saying  that 

66 


wages  will  fall  because  public  employment  is 
open  and  laborers  are  no  longer  obliged  to  com- 
pete for  opportunity  to  labor — which  is  absurd. 
Again,  Gentlemen  of  the  Committee,  on  be- 
half of  thirty  million  laborers  I  challenge  all 
the  opponents  of  this  bill  to  demonstrate  their 
faith  in  the  money  they  advocate;  and  that  they 
may  have  an  opportunity  to  do  so,  I  urgently 
recommend  that  gold  be  retained  as  a  legal  ten- 
der for  all  contracts  expressed  in  gold,  and  for 
public  dues  at  its  market  value.  I  would  even 
change  the  order,  and  say  that  public  dues  may 
still  be  expressed  in  gold,  provided  the  certif- 
icates be  made  legal  tender  at  their  market  value. 
Will  any  champion  of  gold  reject  this  and  still 
declare  his  faith  in  gold?  Within  a  decade  of 
the  day  on  which  this  bill  becomes  a  law,  one 
certificate  of  the  proposed  money  will  buy  from 
three  to  five  gold  dollars.  And  within  another 
decade  we  shall  have  several  million  miles  of 
foundational  roads,  built  without  taxation  and 
without  debt. 


Suppose  the  Kaiser  should  propose  the  fore- 
going plan,  could  the  Allies  reject  it  and  still 
contend  they  were  fighting  to  make  the  world 
safe  for  democracy?  And  if  they  accepted  it, 
would  not  the  Kaiser  go  down  in  history  as  the 
democratic  autocrat  who  tore  the  democratic 
mask  from  plutocracy? 


67 


Democracy 


Vs. 


Autocracy 


EVEN  from  its  beginning  in  1914,  the  war 
was  said  to  be  a  contest  between  autocracy 
and  democracy,  but  this  is  true  only  in  a 
relative  sense,  for  true  democracy  is  not  yet 
born.  The  essense  of  autocracy  is  official  author- 
ity in  the  sense  of  "official  discretion,"  and 
though  we  have  the  democratic  form;  have 
achieved  political  democracy  in  a  large  measure, 
it  is  in  fact  (as  yet)  merely  a  subdivided,  dele- 
gated autocracy  instead  of  an  hereditary,  one- 
head  (mon-arch)  one.  We  elect  our  officials, 
but  they  are  autocrats  still  within  the  limits  of 
their  "official  discretion,"  and  often  are  all  the 
more  unscrupulously  autocratic  because  the 
term  is  short.  It  seems  probable  that  even  the 
petty,  pilfering,  thieving  autocrat  would  be 
more  moderately  predaceous  if  he  were  the  agent 
of  an  hereditary  autocrat  than  he  thinks  he  can 
afford  to  be  with  periodic  election  expenses  to 
meet. 

This  "official  discretion"  is  the  rock  on  which 
democracy  will  founder  if  we  do  not  find  means 
to  avert  the  disaster. 

We  have  no  fear  for  democracy  on  account 
of  "official  discretion"  relating  to  matters  having 
no  economic  significance,  but  discretionary 


power  relating  to  or  affecting  the  distribution 
of  wealth  is  the  "twilight  zone"  in  which  "The 
Unseen  Empire"  is  more  firmly  established  than 
any  monarch  on  his  throne.  The  king  of  this 
"Unseen  Empire"  is  king  by  conquest,  and  is 
therefore  a  strong  man.  His  agents  are  also 
strong  men,  and  are  the  more  faithful  because 
each  one  aspires  to  the  succession.  They  are 
unscrupulous,  and  as  resourceful  as  if  by  nefar- 
ious inspiration.  The  influences  they  bring  to 
bear  permeate  every  activity  of  life,  social,  re- 
ligious, political  and  economic,  and  are  not  ne- 
cessarily bad  in  themselves,  but  only  in  the  use 
that  is  made  of  them;  and  because  the  influences 
are  of  every  conceivable  sort,  good  men  serve 
"The  Unseen  Empire"  unwittingly,  even  as  bad 
men  serve  it  unblushingly;  and  this  unconscious, 
unpaid  service  is  the  more  efficient  because  it  is 
unconscious. 

Let  it  be  noted  that  autocracy  need  not  be  ab- 
solute in  order  virtually  to  enslave  a  people.  A 
slight  advantage  always  working  against  the 
masses  and  in  favor  of  the  classes  will  gradually 
accomplish  their  enslavement  with  more  cer- 
tainty than  rigorous  methods,  just  as  "the  house," 
with  a  slight  advantage  in  the  game,  will  get  all 
the  gambler  has,  more  certainly  than  the  burglar 
or  bold  highwayman. 

The  "official  discretion"  which  all  but  nulli- 
fies our  democracy  and  threatens  its  destruction 
is  centered  in  the  official  distribution  of  public 
funds,  and  in  lesser  degree  in  the  levying  of 
taxes. 

It  is  commonly  believed  that  the  people  do  not 
realize  in  public  benefits  more  than  sixty  per 

69 


cent  of  the  taxes  paid,  the  remainder  being 
wasted  and  stolen  by  indirection.  This  forty 
per  cent  loss  occurs  in  the  "circumlocution"  of- 
fice; that  is,  in  the  levying,  the  collecting,  the 
handling  and  the  distribution  of  the  fund,  the 
greatest  waste  of  all  being  in  the  manipulation 
of  contracts  for  public  work.  And  even  that 
which  finally  appears  as  public  wealth  in  the 
form  of  highways  and  other  public  utilities  is 
seldom  distributed  as  it  ought  to  be.  Instead, 
these  public  benefits  are  almost  invariably  so 
located  as  to  give  collateral  benefit  to  officials 
and  their  friends  and  thus  entrench  the  officials 
politically,  even  if  they  do  not  profit  financially. 
This  is  so  well  known  as  scarcely  to  need  illus- 
tration. It  is  not  even  necessary  to  consult  news- 
paper files  to  illustrate  the  deplorable  truth.  If 
congress  or  the  legislature  is  in  session  and  deal- 
ing with  appropriations  you  will  find  it  in  the 
morning  paper,  in  yesterday's  paper,  and  again 
in  tomorrow's.  The  scandal  of  "log-rolling" 
and  "pork-barrels"  is  so  nearly  universal  that  it 
has  almost  ceased  to  be  scandalous,  being  re- 
garded as  inevitable;  and  even  when  (as  occa- 
sionally happens)  a  public  fund  is  wisely  and 
honestly  spent,  we  are  still  scandalized — by  the 
notability  of  such  instances. 

Now,  what  is  the  cure  for  this  "official-discre- 
tion" autocracy  concealed  under  our  democratic 
form?  Obviously  it  is  to  abolish  official  discre- 
tion, which  is  to  say  that  we  must  make  our  so- 
cial mechanism  as  nearly  automatic  as  possible 
insofar  as  it  relates  to  economic  matters.  This 
is  accomplished  by  the  method  proposed,  which 
is  wholly  automatic  as  to  the  general  govern- 

70 


ment,  and  under  Voluntary  Tax  there  will  not 
even  be  an  assessor  or  a  tax  review  board  for  the 
local  community.  The  local  authorities  will 
have  nothing  to  say  as  to  what  the  land  tax  shall 
be.  The  annual  payment  for  every  site  will  be 
determined  by  a  perpetual  competition  for  its 
use,  and  tax  officials  will  be  mere  clerks  and  ac- 
countants. 

Nor  will  congress  have  anything  to  say  as  to 
what  the  government's  income  shall  be  under  the 
open  public  employment  system.  It  may  be  five 
billion  dollars  a  year  or  ten  billions — the  amount 
will  be  determined,  as  previously  said,  by  the 
amount  of  enforced  idleness  which  there  would 
be  if  public  employment  were  not  open.  And 
most  important  of  all  insofar  as  political  corrup- 
tion is  concerned,  the  location  of  the  public  utili- 
ties will  not  be  determined  by  "official  discre- 
tion" (subject  to  the  kind  of  influence  we  write 
with  quotation  marks).  They  will  gradually 
be  produced  in  every  rural  neighborhood,  sub- 
stantially in  proportion  to  its  population. 

For  several  decades  the  people  of  many  com- 
munities have  been  electing  good  men  to  office, 
only  to  find  they  are  all  but  impotent  to  accom- 
plish any  substantial  reform,  and  in  many  cases 
they  have  been  charged  with  bad  faith,  where 
failure  was  really  due  to  the  impossibility  of 
overcoming  the  natural  law  by  statute  law.  I 
do  not  mean  by  this  that  the  evils  they  were  ex- 
pected to  overcome  are  effects  of  the  natural  law 
in  normal  conditions,  but  that  they  are  the  in- 
evitable effects  of  existing  causes  and  are  natural 
in  the  same  sense  that  disease  is  the  natural  ef- 
fect of  infringing  the  laws  of  health.  The  futil- 

71 


ity  of  attempting  to  establish  justice  by  statute 
law  other  than  in  the  sense  of  giving  expression 
to  the  natural  law,  is  forcibly  illustrated  by  the 
abortive  efforts  to  abolish  interest  and  to  regualte 
prices  and  wages  by  statute.  Not  only  are  such 
attempts  futile,  but  they  make  matters  worse. 
The  natural  law  is  automatic,  whether  for  good 
or  ill,  wherefore  the  attempt  to  abolish  evils 
other  than  by  conformity  to  the  natural  law  is  to 
work  against  nature's  automatic  mechanism. 
Our  only  hope  is  to  make  our  social  mechanism 
beneficiently  automatic,  and  when  we  have  done 
this,  as  briefly  outlined  in  the  foregoing  pages, 
a  bad  man  in  office,  if  there  should  happen  to 
be  one,  will  be  as  impotent  for  harm  as  a  good 
man  now  is  for  good.  To-  the  extent  that  we 
realize  autonomy  in  our  governmental  mechan- 
ism we  shall  have  achieved  democracy  and  ex- 
tirpated autocracy;  shall  have  established  the 
kingdom  of  heaven  on  earth;  in  other  words, 
shall  have  established  the  divine  order,  which  is 
a  theocracy,  for  the  people  who  are  governed  by 
the  natural  law  are  divinely  governed. 


72 


1GAYLAMOUNT 

PAMPHLET  BNDEft 


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